Deductions and credits are two ways to minimize income tax, which I will explain below with an example.

Poole, who is 45 years of age and single, falls under the 12% tax bracket. His adjusted gross income in 2024 was $52,000. The information below is applicable to Poole.

• Medical expenses  $19,000
• Standard deduction 14,600

The relevant tax brackets are:
Income Tax ≤ $11,600 10% and $11,600 to $47,150 is 12%.

Poole wishes to minimize his income tax. What is Poole’s 2024 total income tax rounded to the nearest dollar?

Standard deduction vs Itemized deduction

Standard deduction $14,600

Itemized deduction:

$52,000 x 7.5% = $3,900 - $19,000 = $15,100

We will apply the itemized deduction of $15,100 because it is higher than the standard deduction.

$52,000 - $15,600 = $36,900

$11,600 x 10% = $1,160 Income Tax

$36,900 - $11,600 = $25,300 x 12% = $3,036

Answer: Income Tax payable = $4,196 ($1,160 + $3,036)