2min chapter

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Tax time do's & don'ts

FIT(ish)

CHAPTER

Deduction Dos and Don'ts

"I feel like this is something that we could talk about for hours. And it's probably the most beneficial in terms of what people need to know," he says. "So if we're looking at deductions as a whole, it's either money that you've spent or some other deduction that's going to decrease your accessible income and your tax payable."

00:00
Speaker 2
It's so funny you say that because I feel like that's almost an excuse for people to just have like a bit of a yolo moment when they go shopping and they're like, oh, it's fine. I can claim this. And I'm like, but can you like, are you sure you can claim that? Because the person that you're referring to is like an actor. So of course they're going to be able to claim something like this. And then, okay, so that actually brings me very perfectly into my next segue, which is deduction do's and don'ts. And I feel like this is something that we could talk about for hours. And it's probably the most beneficial in terms of what people need to know. So firstly, I know this sounds really, really dumb and I sound like David from Schitt's Creek here, but can you explain what a tax deduction actually is? Because I know, I know what it is. So I know that it's like a work expense, but I don't really understand what it is. Sure.
Speaker 1
Okay. So you're right, it is a work expense. Some of them, some deductions aren't work expenses though. So it's good to keep that in mind. There are other deductions that don't relate to your work. So if we're looking at deductions as a whole, it's either money that you've spent or some other deduction that's going to decrease your accessible income and your tax payable to give you your taxable income. So you've got your accessible income, which is your wage, your pre-tax income, I guess, or however you want to think about it. Let's just say your wage is $60,000 a year. That's essentially your accessible income. You pay tax on that throughout the year. Come tax return time. Your deductions will decrease that effectively. So instead of, perhaps if you've got a few thousand dollars deductions, instead of paying tax on $60,000, you were meant to pay tax on $58,000 because you had a $2,000 tax deductions all up. And then your tax will be recalculated on that new taxable income, which may or may not relate to a refund. So that's a simplistic way. There's other things in there, but that's a really simplistic way of looking at it. Okay.

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