income taxes

Biden’s Capital Gains Tax Increase No Big Deal

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capital gains tax increase

President Biden proposed increasing the capital gains tax and while that makes great headlines, it probably isn’t as big of deal as it sounds like. First off, the higher tax would only apply to those with income above $1 million. That takes out most taxpayers right there. Avoiding Capital Gains Taxes Also, capital gains is one of the easiest to avoid taxes. Most people hope to never lose that much money, but there are plenty of losses to be had even by the best investors. Matching those losses up to gains is called tax-loss harvesting and is frequently used by those with large enough investment portfolios to eliminate some or all of their capital gains taxes. Imagine a scenario where a wealthy investor purchases ABC stock and XYZ stock. A clever investor would make sure that ABC stock and XYZ stock pay an acceptable dividend based on their risk and expected return. So, over a couple of years, our investor collects his dividends. Since the only way this new tax applies is if the investor has $1 million in income, they will pay the highest dividend tax bracket of 20% tax on the dividends, still far lower than the 39% …

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Tax Deadline 2021 Moved To May

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tax deadline 2021

The IRS is moving the tax-filing deadline to May 17 from April 15. Update: Colorado tax deadline date has officially been moved to May 17. Turns out the new Biden Covid Relief package has pushed the IRS over the edge to moving the tax due date for 2021. Tax day 2021 will now be May 17. There are just enough changes to tax law in the new package that the IRS figures implementing the changes, publishing the updated tax forms and guidance, and then getting filed is going to be too tight for many taxpayers this year. The new tax deadline 2021 on May 17 is basically a one-month extension from the standard April 15th deadline, except May 15 is on a Saturday, so the new tax deadline for 2021 is Monday, May 15, 2021. Tax Deadline 2021 Of course, the IRS is spinning this as them helping taxpaying Americans. It helps the IRS too, but either way, many taxpayers will take it. The new tax deadline for 2021 is forth both filing and paying federal income taxes, unlike a typical tax extension. As always, taxpayers can get a free, no-questions asked, extension to October 15 by filing Form 4688, …

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Business Tax ID Number – FEIN and EIN Explained

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fein ein difference ssn

There is an unfortunate amount of confusion surrounding the concept of the Federal Tax Identification Number. It is ironic, because the whole Tax ID, FEIN, and EIN thing is actually very simple, mostly because they are generally all the same thing. However, it isn’t surprising that this concept confused many personal finance students because when it comes to things like laws and taxes, tiny variations in terms usually mean very different things. What is a Tax ID Number? Tax ID Number, or Tax Identification Number (TID), and the like, all refer to the same thing. When taxes are filed, whether they are personal income taxes, or business income taxes, there must be a unique identifier used on the tax return. Likewise, if income is reported, that income must be reported to the IRS with a unique number identifying who it was paid to. In the case of Federal Income Taxes, the tax ID number is a Social Security Number. However, businesses do not have SSN, so they need a different unique number to use for identification purposes on tax documents. FEIN stands for Federal Employer Identification Number. It’s “brother” is the EIN which stands for Employer Identification Number. What Is …

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

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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 …

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IRS Form 1040 – 2018

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postcard sized tax form

The 2018 IRS Form 1040 has been out for a while now. Unfortunately, more than a little bit of the new tax law is on shaky ground while the government is shutdown and the IRS is playing catch up with its remaining staff. That being said, it’s time to take a quick look at the 2018 Form 1040. Check out my look into Credit Karma. IRS Form 1040 Simpler – Sort Of One of the points of the new tax law was to make filing taxes easier. The supposed goal was a tax form so simple it could fit on a postcard. While the main 1040 could indeed fit on a postcard, a lot of taxpayers are going to need to add one or more “schedules” to calculate the values that go on that postcard. But, since when did a bit of reality clog up the pronouncement of politicians The 1040 Schedules The usual schedules from previous years are still here, including Schedule A if you are itemizing your deductions, Schedule C for small business owners and the self-employed, Schedule D for capital gains/losses, and so on. New Schedules making their debut so that the 1040 can be artificially small …

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Colorado State Taxes and Finances

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Hey, guess what I found? It’s an economic document focused on Colorado! Whoop! Whoop! Finance Nerd Alert! The Colorado Legislature’s December 2018 Economic Forecast is out. There’s always plenty of good stuff in there for a finance geek to look at and see both how the Colorado economy is doing, and how the Colorado Legislature is managing it. I’ll dig in here in the next day or two, but here are some interesting tidbits so far. Marijuana Taxes Aren’t Everything Despite what the uninformed and misinformed might think, tax collections on marijuana just aren’t that big of a thing compared to the overall budget. If you thought pot taxes would solve all of the governments budgetary needs you were duped, or sorely mistaken. While December isn’t finished yet, it looks like Colorado’s pot tax revenue will come in at about $250 million. That is real money, but it isn’t difference making making. Colorado’s state budget is $29.9 BILLION. That means the $250 million from marijuana taxes doesn’t even make the budget figure unless you carry out more decimals. $250 million is just 0.08% of the State of Colorado’s overall budget. In other words, it’s a blip on the radar. It …

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New Section 199A Business Tax Deduction

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It’s time to dig into how the new Republican tax law is actually going to affect you and yours this coming tax season. While it has been a while since the law was passed, it takes some time for the IRS to iron out the actual rules. Plus, you have to wait for the year to go by before you file your taxes. So, here we are, heading into 2019, and we’ll be doing our 2018 taxes. There are a lot of changes, but one of the biggies is Section 199A. I’m going to take a quick look at the Section 199A Deduction as it applies to a freelancer, or someone who owns their own side business. Section 199A Tax Deduction As noted at the time, the Republican tax bill of 2017 was passed quickly in order to keep any opposition from building up and stopping its passage. As a result, it wasn’t very well thought through, and chances are that there are more than one or two bugs in the system. The IRS itself tried to iron some of those out as it created definitions, and rules and regulations, but there is still a lot of uncertainty about exactly …

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How To Deduct Property Taxes

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

Can I Use My 529 Plan to Pay For K-12 Expenses

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529 plan tax law changes states

529 plans are a tax-advantaged account that allows saving and investing for college expenses. Before last year’s new tax law was passed, one got tax-deferred growth in the account, and tax-free withdrawals for qualified college expenses. Even better, there were very few 529 contribution limits on most plans. Now, the recent tax law has opened up another possible way to use 529 funds tax-free. 529 Plan Withdrawals Until 2018, you could not use your 529 plan to pay for anything other than higher education expenses, in other words, college. Withdrawals from a 529 plan for any other purpose were not only taxable, but subject to a 10 percent tax penalty. But, the new tax law passed at the end of 2017 changes the rules. This tax law allows parents to use up to $10,000 per child for elementary, or secondary education. In other words, you can use up to $10,000 from a 529 plan to pay for private school during the K-12 years. This is a big boon for those who send their kids to private schools. Interested in automatically investing for non-college expenses? Check out my Acorns reviews. Using 529 Money To Pay for Private School There is a …

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Home Office Tax Deduction

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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 …

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