Tax Deductions

How To Qualify for the Earned Income Credit – The Easy Version

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claim eic

OK. Let me start by saying that if your adjusted gross income is going to end up in the six figures, you’re out. Go read this article about investing with Acorns, or this one about Credit Karma reviews, or this one about maximizing cash back with Rakuten. Also, there are some “special situations” that we won’t be covering here. This is the easy version. You have kids, you might qualify for the earned income credit. Then, here is how to qualify for the earned income credit, or EIC. Qualifications for EIC So how, do you qualify for the EIC? Basically, have a low enough income, and have some kids, while working. Your Income Has to Be Low Enough You need kids that are your dependents You have to have earned income (most earned income come from a job or home business) You have to have a valid Social Security Number, and so does the child or children you are using to claim the credit Or certain special situations. Since this is short version we are covering it here. Check out the IRS page. Your income needs to be under $57,414. Your investment income has to be below $10,000. Earned income …

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Credit Karma Tax Review Free Scam or Good Filing?

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credit karma tax review free filing

Has it really been five years since Credit Karma started Credit Karma Tax? Credit Karma tax is a free-ish way to file your taxes for free. While Credit Karma tax started out with some bumps it is now old enough to have chased out a lot of the bugs. And it is time to update our Credit Karma tax review. Credit Karma Tax Reviews Complaints CreditKarma.com offers a free tax return service, so it’s time for a Credit Karma tax review. The Credit Karma tax scam concerns are pretty much the same as with the original Credit Karma. You are handing over a lot of personal and financial data. The company has been around long enough to have earned some trust, but concerns about all online financial offerings are real. One main difference between Credit Karma and TurboTax, or other offerings, is that you cannot buy and download an offline version. You will fill out all tax forms online and the hidden Credit Karma tax calculator will perform all the calculations online, behind the scenes. Initial Credit Karma tax reviews are mixed, so let’s take a look. (Make sure you are not on CreditCarma, KreditKarma, or any other variations which …

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Charitable Contributions Tax Deduction

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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 …

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New 2022 Tax Numbers Released – Good News for Taxpayers

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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 …

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Medical Expenses Deduction 2021

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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 …

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Is Paying Taxes Patriotic?

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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. …

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Deduct Home Office on Taxes

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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 …

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IRA Yearly Fee

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extra money

Update: You can easily get a free IRA account almost anywhere these days. If you are paying a custodial or maintenance fee, consider switching IRA custodians. Free IRA Companies: Fidelity Charles Schwab E-Trade SoFi Betterment Ameritrade Vanguard And tons of banks… If you do still have an annual IRA fee… Here it comes, the annual fee on your IRA account. Many brokerages charge their yearly IRA fee, or custodial fee, on their customer’s IRA account during the third quarter. If you take a positive view of the industry, they do it then because there are many other things that have to happen during the fourth quarter, tax reporting is at the top of that list, so the third quarter is less busy. If you take a less a less charitable view of the financial industry, then they do it in the third quarter because that is when financial clients are the least likely to be paying attention. It’s summer, you aren’t really thinking about rebalancing your investments, or closely reviewing your paperwork for taxes, and so on. In other words, the third quarter is the best time to slip in an annual fee unnoticed. Why Is There an Annual Fee …

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Capital Loss Tax Deduction

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capital loss tax deduction schedule d

When you sell certain assets or investments that have appreciated in value, you may owe taxes on the increased value. The difference between what you paid for the investment and the amount you sold the investment is a capital gain and it is subject to capital gains taxes. However, if you lose money on an investment, you can deduct the capital loss. Capital Loss Deduction When it comes to taxes, the more tax deductions the better. And, when you lose money on an investment, a tax deduction can take out a little of the sting. However, deducting capital losses can be tricky. Get the rules straight to save on taxes and avoid making mistakes taking your investment loss tax deduction. Just like with capital gains, there are two kinds of capital losses, short-term capital loss and long-term capital loss. Generally, a long-term capital loss occurs when you have a loss on an investment that you have held for at least one year. Conversely, a short-term capital loss occurs when there is a loss on an investment held for less than a full year. The tax deduction for capital losses is limited to $3,000 per year against your regular income. That …

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