Americans love paying taxes.
They love it so much that over 120 million of them chose to pay extra and had to get refunded.
All jokes aside, there's a lot of serious information to know when you're prepping for tax time, and it's never too early to get started! It could save you time and money next year.
Luckily, it doesn't have to be too hard, if you know what you're doing.
Let's talk about some tax planning tips to get you the best deductions.
Tax Planning Tips: Prepare Your Documents
Throughout the year, even if you're starting in July, save your receipts on all business-related expenses.
If you need your car for work, like an Uber driver, save your oil change receipts. And any repairs or maintenance-related expenses with your vehicle.
Make sure you have your income statements, social security information, and any relevant tax documents.
If you donated to charity and received a 503c, or if you did some independent work on the side and got a 1099, you need to keep these files safe and ready for tax time.
Any relevant tax files, like your previous returns and your direct deposit information, are best kept in one safe place to make filing a breeze.
Know Your Deductions
If you put money into your retirement fund, you're eligible to deduct up to $6,000, or $7,000 if you're over 50. There are deductions for all sorts of donations, including donating a car, boat, or anything worth over $500 to a tax-exempt charity. Paying student loans, tuition, and other education expenses will offer you possible deductions. If you worked from home during the pandemic, this may entitle you to a home office deduction, but only if you are an independent contractor. You can only deduct home office space if you are self-employed.
Understand the Child Tax Credit
The tax credit is the newest deduction in the system, and currently applies to 2020.
Part of the Coronavirus Aid legislation was the addition of a new child tax credit. If you have children under the age of 13, this may apply to you.
Based on your income and the expenses you paid for childcare, you may be eligible for a tax credit of up to $1,050 per child and $2,100 for two or more children.
Preparing all the necessary documents and understanding the ever-changing tax laws is no easy feat, but luckily, you don't have to do it alone.
You can always reach out for extra help when it comes to tax prep. Having an experienced accountant like TYS, is the best way to ensure that you won't have any issues when tax time comes.
Never Too Early - When it comes to tax planning, there are so many deductions and documents to worry about, and that means it's never too early to get started!
Arm yourself with knowledge, stay up to date on the latest tax news, and while you're prepping, take a minute to learn about what income is taxable or not.
If you have any questions about how you can maximize your future returns,
don't hesitate to contact our offices today.