Taxes

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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2023 Required Minimum Distributions

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2023 Required Minimum Distributions 1

If you have an IRA or 401k and you are over 70 1/2-year-old, you need to take a required minimum distribution, or RMD, from your retirement account each year. However, with the coronavirus pandemic, Congress passed specific relief for certain kinds of retirement accounts creating different rules for your 2023 RMD. New 2023 RMD Rules Normally, taxpayers over the age of 70 1/2 years old have to take money out of their retirement accounts like IRAs and 401k plans. The reason is simple. The IRS doesn’t want that money sitting there untaxed forever. So, when you get into retirement, it wants to tax that money that you enjoyed paying no taxes on for all of those years. With the coronavirus pandemic of 2020, however, Congress looked to provide some relief to taxpayers in the form of $1,200 payments, small business loans, and relaxing the rules on accessing and using retirement plan money. One of those benefits is the suspension of required minimum distributions, or RMDs, for 2020. All RMDs, regardless of the owner’s age, or how many required minimum distributions have already been taken are suspended for 2020. In other words, there are no required distributions during 2020. If you …

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What Are Pre-Tax Dollars?

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pretax dollars

Financial advisors and other financial professionals throw around certain terms like, pre-tax dollars, like everyone already knows what they mean. In some cases, they are right, and in other cases, most people only have a partial grasp on what exactly certain financial terms mean. In many cases, knowing the complete definition of a word or phrase makes all the difference. What Does Pre-Tax Mean? Pre-tax dollars is a phrase that is often used in conjunction with retirement planning and 401k contributions. In fact, one of the benefits of a 401k plan is that contributions are made with pre-tax dollars. But, what is the definition of pre-tax dollars, anyway? When an employee gets paid, there are numerous deductions that get taken out of their paycheck. These payroll deductions range from income tax withholding to FICA taxes to voluntary contributions for things like health insurance or cafeteria plans (Section 125 plans). Some of the deductions from your paycheck, like federal tax withholding, are computed based on how much you are paid. Pre-tax means that the deduction occurs before that withholding is calculated. This is why many financial writers and other financial experts point out that contributing to your 401k plan doesn’t actually …

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What Is Still Deductible

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Trump’s new tax law has caused a lot of confusion. One of the big areas of confusion is that many of the so-called “itemized-tax deductions,” won’t really count for most American taxpayers anymore. It’s not that those deductions are gone, it’s just that triggering the threshold where itemizing tax deductions saves you more money than taking the standard tax deduction has moved. New “Smaller” Tax Forms Politicians are always lying and claiming victory when they have achieved no such thing. One thing many politicians tried to take credit for with the new Trump tax law was making taxes simpler. They did… kind of… sort of… My favorite part of the new tax law is that you can “file your taxes on a postcard.” <insert super eyeroll> You know, if you use both sides of the postcard… with no space for any sort of address for mailing it… and if anyone still used postcards, which the IRS does not recommend for filing your taxes. The official IRS 1040 form would indeed fit on an non-mailable postcard. If you printed it front and back. Sound dumb? It is. Still, here we go, the official IRS Form 1040. Wait a minute. That IS …

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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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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 …

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