Each year every citizen in the US is liable for paying taxes on the income earned in that year.
How much your tax liability is depends on how much your income is "taxable." Do no confuse taxable income with your gross income. Your taxable income will always be less than your total income, and here is why.
In 2005, the standard deduction for single filing is $5,000 per individual. That means you total up all of your income, and you deduct $5,000 off your income. Then you will also deduct a $3,200 exemption amount. So that's for a total of $8,200 worth of income that you do not need to pay taxes for.
Other than the standard deduction and the personal exemption that can be deducted off your income, you are also eligible for other deductions such as student loan interest that you paid, any qualified tuition that you paid, any savings that you put away in a qualified deferred retirement plan (such as Traditional IRA, 401k, 403(b), etc.).
So, how do get more taxes back? Let's talk about standard deduction versus itemized deduction. When you take a standard deduction, you are only allowed to take $5,000 off your income. When you itemize, you are able to take deduction on things such as mortgage interest, property tax, cash and non-cash donations that you made, tax preparation fee that you paid, medical and dental expenses, union fees, and many other deductions. When you itemize you want to make sure that the total of your itemized deduction is above the standard deduction for it to be worth it, otherwise, just take the standard deduction.
