One deduction method is to list, or itemize, allowable expenses. The majority of taxpayers, however, still opt for the quicker standard deduction. On 2000 returns, inflation adjustments offer more standard deduction savings for all taxpayers. However, higher income filers won't get to take full advantage of the higher amounts. Taxpayers whose income is more than the maximum in a filing range won't be allowed to use any personal exemptions.
Credits provide a better tax break than deductions.
Rather than reducing the amount of income used to calculate tax, credits come into play after the tax due is figured and the credit amount is subtracted directly from the tax bill. This earned income credit returns money to the taxpayer based on how much the filer earned and whether the individual had children. The 2000 credit paybacks are higher, too. But taxpayers who in past years got tax credits based on their care for a foster child may be out of luck on 2000 returns. Previously, a blood relationship or formal agency placement wasn't required to claim these tax credits.