Tax deductions help to reduce taxes owed at the end of the year for individuals and companies. Deductions can come in the form of expenses incurred throughout the year or as itemized deductions. If an individual adds up all of their eligible deductions for the year and they don’t equal the standard deduction, the person can elect to take the higher standard deduction.
Some examples of (itemized) deductions include healthcare, mortgage interest, property taxes, and home office and related job expenses. Up to $3,000 in losses on investments can also be used to reduce tax liability. Investment losses from the previous year can be carried forward into the current year for up to $3,000 in total investment losses.