Deductions

Charitable Contributions Tax Deduction

by
charitable contributions

Republicans passed the Tax Cuts and Jobs Act in 2017 reshaping the way many Americans pay taxes. Apart from the uninspired, and obvious marketing, based name, the law made some deductions disappear. It tried to fill in those deductions by giving everyone a higher standard deduction. Theoretically, people pay the same or lower taxes and don’t have to itemize to do it, but politics gets in the way of everything in Washington. Charitable Cash Contributions One of the things that was originally supposed to go away in the bid to make it so fewer people had to itemize was getting rid of the charitable contributions deduction when you took the standard deduction. But there were howls of terrible things to come, whispers of charities disappearing from the country all together, cats and dogs living together, mass hysteria! And so, Congress caved and let people who take the standard deduction still take a deduction for some charitable giving. Line 10b under Adjustments to Income, taxpayers may deduct up to $300 for cash donations. That $300 is the same for filing single or married filing jointly. If you do the married filing separately thing, you have to split it, so each of …

Read More

New 2022 Tax Numbers Released – Good News for Taxpayers

by
new 2022 tax numbers

The IRS just released the new tax inflation adjustments for 2022. As you are likely aware the IRS adjusts some tax deductions and income limits for inflation each year. The new 2022 tax numbers are higher across the board thanks to higher inflation numbers than the last few years. New 2022 Standard Deduction The Trump tax changes implemented under the Tax Cuts and Jobs Act made the standard deduction higher and eliminated some itemized deductions. As a result, far more people take the standard deduction on taxes than did before. The law did remove the limitation for itemized deductions that do remain. 2021 standard deduction numbers can be found here. The standard deduction for 2022 for married filing jointly is $25,900. The standard deduction for 2022 for single filers is $12,950. New 2022 Tax Brackets The tax brackets for 2022, more formally known as the Marginal Rates, reflect higher starting incomes for each tax bracket in 2022. 2021 tax brackets information is here. New 2022 Tax Brackets Single Filer New 2022 Tax Brackets Married Filing Jointly New 2022 Flexible Spending Accounts (FSA) Limits The new limit for Flexible Spending Accounts, or FSA accounts, is $2,850 with a maximum carryover of …

Read More

Medical Expenses Deduction 2021

by
medical-taxes

Can you deduct medical expenses in 2021? Are your medical expenses tax deductible? Yes… but… Medical Expenses Tax Deduction Limit Medical expenses are tax deductible for 2021, but only after they exceed 7.5% of your income. You also must itemize your deductions to claim the medical expenses tax deduction. Finally, medical expenses are deductible in the year you PAY them, not when they happen. If you’re going to hit the medical threshold in 2021, then pay as many as you can by December 31. If you are not going to hit the threshold, push as many medical expenses as you can into 2022. What does this all mean exactly? Let’s dig in. Check out my Grifin review The tax deduction for medical expenses has a floor of 7.5% of income. By income, the IRS means your adjusted gross income (AGI). Usually, when the IRS has rules or regulations that refer to income, they mean your AGI. Your AGI is calculated on your Form 1040. Your adjusted gross income shows up on Line 11. Your total income is basically all of your income from wages, capital gains, interest, dividends, Social Security, business income (if any) and pensions added together. Your adjusted …

Read More

Is Paying Taxes Patriotic?

by
judge learned hand

As the end of the year approaches, I’ll be focusing on tax breaks and deductions that can reduce your 2021 income taxes. Every once and a while as I help readers, friends, and family avoid paying higher taxes someone asks whether avoiding taxes is patriotic. Remember that you are an American. As an American, you live in a democracy (technically a republic) and you vote to elect representatives who go on to make laws, rules, and regulations. As an American, it is your duty to comply with these laws, rules, and regulations. Beyond that you are free to do what is best for you, your family, and your community. The influential jurist Learned Hand (No, I’m serious, he is a real person) once said, Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes. Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir. 1934) Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. …

Read More

Deduct Home Office on Taxes

by
Deduct Home Office on Taxes 1

A home office tax deduction can be a great way to reduce your taxes if you own a small business. The home office deduction gets a bad rap because a few years ago, deducting a home office was seen as an “audit trigger.” However, that issue was blown out of proportion then, and it is almost a non-issue these days, provided you do have a business and a legitimate home office. So, how do you deduct home office on taxes? How To Qualify for a Home Office Deduction Qualifying for a home office tax deduction for your business is pretty simple, providing you have a home office that you use. The official rules state that your home office must be your primary place of business, and that you use the office exclusively for that business. In other words, you can’t deduct the little area you have setup in the corner of your living room as a home office. People giving tax advice will often go overboard here saying things like, if there is even one toy in your office, then it is disallowed as a deduction. This scares legitimate small business owners with home offices from deduction them sometimes. Keep …

Read More

Roth IRA Income Limits 2022 and 2023

by
roth ira 2020 2021

The questions have started coming in regarding the 2022 and 2023 income limits for Roth IRA contributions. Planning ahead for taxes is always a good idea. However, sometimes, you can get out a little bit too far. The IRS publishes various numbers, tax brackets, and the like for the next tax year during the fall of the previous year, depending upon what the number is, and how it is to be calculated. Maximum salary limits for Roth IRA contributions in 2023, for example, were known well in advance because the number was set by the IRS in advance. However, the income limitations for Roth IRA contributions are indexed for inflation. In other words, the IRS must wait until it has the proper inflation index calculation according to its rules and regulations. Then, it must apply that inflation amount to the Roth IRA contribution limits for income and compute new Roth IRA income phase-out limits and the maximum salary allowed to make Roth contributions at all. Don’t forget, the law removing the salary cap for converting a traditional IRA to a Roth IRA has been made permanent, so you can convert your IRA to a Roth IRA regardless of how high …

Read More

New 2020 Tax Numbers Released By IRS For Filing 2020 Income Taxes in 2021

by
mileage rate irs traffic

Now that the April 15th deadline is behind us, the best personal finance advice you can take is to start planning for your 2020 Income Taxes now. That way, you will be ready to take advantage of all the 2020 tax tricks, tips and deductions you can. Sure, last minute tax advice and finding those hidden tax deductions during crunch time is great, but to really save money on taxes, you have to plan all year long. Start watching now for expenses that you can deduct from your taxes and start keeping records and receipts for all of those possible tax deductions that might be usable to lower your taxes if you meet certain requirements or minimum thresholds. Most importantly, start keeping your contemporaneous records of important deductible expenses like business mileage, unreimbursed expenses, training and education expenses, and medical expenses. IRS 2020 Standard Mileage Deduction Rate The standard mileage rate for 2020 is 57.5 cents per mile for business reasons. The 2020 standard mileage rate for miles driven for charitable purposes is 14 cents per mile. You can deduct all unreimbursed mileage driven for business reasons and most charitable reasons as long as you have written documentation of the …

Read More

How To Deduct Property Taxes

by

Property taxes can be an important tax deduction for many home owners. Real estate taxes, in particular, can be a significant tax deduction.

Home Office Tax Deduction

by
home office tax deduction teddy bear

One of the best deductions for self-employed people who work from home is the home office tax deduction. Basically, you take the square footage of your home office and compare it to the total square footage of your home, and then you get to deduct a similar percentage of certain house expenses as a business deduction. It’s one of the ways to take a little bit of the sting out of self-employment taxes. How To Claim Home Office Deduction Like most self-employed small business tax deductions, you take the home office tax deduction on Schedule C. You’ll need Form 8829 Expenses for Business Use of Your Home to calculate and file your deduction. If you use tax prep software like TurboTax, it will do this for you. (You’ll need one of the small business editions to take this deduction, but it’s most likely going to save you a lot more money than you pay for a more expensive version of TurboTax.) To qualify for the home office deduction, you have to use a specific area of your home exclusively, and on a regular basis. In other words, it has to actually be your office where you do your work for …

Read More

Fix RMD Tax Problems With QCD

by
irs taxes tax form

You’ve spent a lifetime saving for retirement, and you did a really great job. So great, in fact, that you don’t need to take money out of your IRAs. But, you’ve turned 70 1/2, and now the IRS is forcing you to withdraw money from your IRA every year in the form of a Required Minimum Distribution, or RMD. Is there any way to get around having to take an RMD? Mitigating Your RMD’s Affect On Your Taxes The IRS gave you years of tax relief on the funds in your IRA. They only did that to encourage you to save for retirement. Now, that you’re retired (or at least retirement aged) they want their money now in the form of taxes on your IRA withdrawals, but if you played your cards right, you might not ever need to withdraw, and the IRS would have to wait longer for that money. The IRS hates waiting.  The RMD keeps this from being the case. Once you turn 70 1/2 years old, you have to take some money out every year, and the government is there, waiting to tax it. Unfortunately, there is no way to get out of having to take …

Read More