Pretax Deductions

• Pretax deductions are generally deductions that reduce your household's taxable income. Most pretax deductions include day-to-day expenses, including medical expenses, mortgage interest and state income taxes. As opposed to the standard deduction, taxpayers who itemize deductions can take advantage of reducing taxable income.
  
  

Standard Deduction

• At the time of publication, the standard deduction for single taxpayers who do not itemize is $5,700 and $11,400 for married couples filing jointly with their spouse. The standard deduction is subtracted from your gross income to allow for common living expenses. If a taxpayer has living expenses that exceed the amount of the standard deduction, it is important to itemize to reduce taxes owed to the IRS.
  
  

Itemizing Deductions

• Taxpayers who pay a large amount for certain expenses can itemize deductions. If you make large charitable contributions, pay for college tuition, have excessive medical expenses, pay state and local tax, pay mortgage interest and points, have a casualty or theft loss, or your employer does not reimburse for job-related expenses, you can reduce your income by itemizing. The IRS allows you to deduct a portion of your expenses from your taxable income; thus, reduce the amount of the taxes you will owe on your income. You must use tax Form 1040 and Schedule A to itemize.
  
  

Post-Tax Deductions

• A post-tax deduction, also known as a tax credit, directly reduces your tax due. After you calculate your taxable income and subtract any deductions, you must calculate your tax due to the IRS. Tax credits reduce that amount and some tax credits can eliminate your tax and result in a refund. Tax credits -- such as the Earned Income credit, Make Work Pay Credit and the Adoption Expense credit -- are refundable credits. If a refundable credit reduces the amount of tax you owe to a negative amount, the IRS will refund the amount to you. Nonrefundable credits -- such as the Child Tax Credit, Child and Dependent Care Credit and the Green Energy Credit -- only reduce your taxes owed and will not increase your refund.