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2021 New Tax Law Changes (Returns filed in 2022)

12/28/2021 2:08 AM ⋅ ⋅ Featured

REMINDER: Put all your tax documents into your green A Tax Haven bag as they come in the mail!

***There have been multiple changes for the 2021 filing season:

including additional pages of tax forms, extending some credits and rules while removing many others, as well as the addition of several new rules and credits just for the 2021 filing season!

You may now qualify for some credits that you may not have qualified for in the past!

  • The best way to gather all of your tax data!

Here are some tax reform laws to be aware of and some strategies to use by the end of the year:

  • Be Generous -2021 Non-Itemizer Donation Rules
    • FOR 2021 ONLY- like 2020, you are able to take a tax deduction for charitable donations of money to a qualified organization even if you don’t have enough deductions to itemize! For 2021- the credit of $300 for single taxpayers & $600 for couples is deductible after AGI, and the cash contribution limit is also increased to 100% for Schedule A itemizers.
    • It’s important to remember that you MUST have a receipt to back up your contributions! This will be an audit spot so be sure to print and keep those receipts!
  • Reduce Your Taxable Income by Contributing to Retirement Plans
    • Max Out your Retirement Plans by December 31st
      • Check with your employer for guidelines on your current 401K/403B
      • Contribute to your IRA / SEP IRA
      • If you are self-employed, you can also set up a SIMPLE or SEP
      • Remember, for those over 50, you can add an additional $1000 catch-up amount to your IRA contributions
      • Contributing to your retirement may also make you eligible for a Saver’s Credit of up to $1,000
  • Miss the December 31st deadline? You can still contribute to your IRA or ROTH IRA by April 18, 2022, for the 2021 year.
    • Required Minimum Distributions for those 72 or older are required in 2021. Check with your retirement company if you haven’t already taken your RMD for the year.
  • Postpone Income
    • While it may be difficult to postpone wages or salaries, try to defer a year-end bonus to be paid out in January of the new year. Just make sure this is standard practice for your company.
    • If you are self-employed or are a freelancer/consultant, you can delay billings until late December to ensure you don’t receive payment until the new year.
    • Keep in mind that if you anticipate additional income for the new year, it could push you into a higher tax bracket then, so use this tip with caution.
  • Business Owners Can Eat Out Again
    • For 2021 & 2022 ONLY- Business Meals purchased in restaurants can be deducted at 100%!
    • Reminder – business meals must have been incurred while traveling out of town on business or be provided for clients, customers, or employees while business is discussed and tips are included
  • Children Credits Large Increase- Child Tax Credit, Earned Income Credit, Dependent Care Credit
    • For 2021 ONLY- the CTC, EIC, & DCC have all increased and been made more refundable
    • For 2021, there have been numerous changes made to these credits, including EIC age requirements without children & CTC available for dependents up to age 17
    • The Kiddie Tax is back in action for dependents with unearned income over $2200
    • The EIC for 2021 & beyond has increased the investment income limitation to $10,000
  • Economic Impact Payments & Child Tax Credits Pre-Payments
    • For 2021, taxpayers will be required to reconcile their 3rd Stimulus EIP Payment on their tax return. This was received in approximately March/April or later in 2021 and was up to $1400 per person. You will need to know the amount received for your taxes.
    • For 2021, some taxpayers received an advance payment of CTC in July through December. This will have to be reconciled on the tax return, as well.
    • **In January 2022, the IRS will send you Letter 6419 to provide the total amount of advance Child Tax Credit payments that were disbursed to you during 2021. Please keep this letter regarding your advance Child Tax Credit payments with your tax records.
  • College
    • You may be eligible for the American Opportunity Tax Credit or the Lifetime Learning Credit if you are a college student
    • If you pay for college courses for the first quarter/semester of the new year by December 31st, you may be able to increase your credit if you did not have enough tuition already paid to meet the $4,000 needed for the maximum credit
    • Student loan interest can also be deducted up to $2,500 if you are making payments.
  • Loss Harvesting
    • Sell investments to offset taxable gains – dollar for dollar
    • If you still have a capital net loss, up to $3,000 can reduce other taxable income.
      • More than $3,000 can be carried over to the next tax year!
    • Through 2025- excess business losses can be used against other types of income
    • Net Operating Losses also have new rules in 2021- they are limited to 80% of taxable income, are not available for carryback, and NOLs from 2018 forward can be carried forward indefinitely until used up
  • Health and Dependent Care Flex Spending Accounts
    • Flex accounts avoid income tax and social security taxes so they are a benefit to you, but not taxable to you
    • For 2021, there are different rules allowing more carryovers of funds to the new year
  • Maximize Itemized Deductions – Reminder- You can often itemize on your AR return even if you don’t have enough to itemize on the federal return!
    • The standard deduction has increased this year, up to $12,550 single (or $25,100 if you are married and filing jointly OR $18,800 for Head of Household). If your deductions are right at those max amounts, here are some options for you:
      • Donate more to charity
      • Pay additional medical bills, but keep in mind the medical floor is anything over 7.5% of your AGI – which has been made a permanent law now
      • Pay additional state, real estate, or personal taxes by combining years
  • Unemployment in 2021
    • Unemployment in 2021 is taxable income at this time. In 2020, up to $10,200 of unemployment was not taxable
  • Mileage Deductions for 2021- some actually lowered!
    • Standard Mileage Rates for:
    • Business              56 cents
    • Charitable           14 cents
    • Medical               16 cents
    • Moving               16 cents
    • Depreciation       26 cents
  • 1099 NEC- Non Employee Compensation
    • Reminder- 2020 and beyond- Contract laborers should receive their income on a form 1099-NEC instead of a 1099-Misc
  •  IRS Online Tax Accounts – irs.gov
    • You can set up your online tax account to view your balance, download IRS notices and letters, make and view payments, and to access tax records. You will need to be able to verify your identity with them first.
    • You can also request an IPIN- a six digit number assigned to eligible taxpayers to prevent the misuse of their social security number on fraudulent tax returns. This number is reissued each year and must be used on your tax return to file.
  • Social Security Online Accounts – ssa.gov
    • You can set up this account to verify your earnings are showing correctly on your social security account and to see other information about your social security.
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Posted in: Financial Tips, News to Know, Tax, Tax Deductions and Credits ⋅ Tagged: , , ,

What You Need to Know About the New Tax Laws

01/10/2019 3:07 AM ⋅

What You Need to Know About the New Tax Laws

Here are some strategies to use by the end of the year so that you can use the tax reform laws to your advantage.

  • Reduce Your Taxable Income
    • Max out your 401(k) by December 31st
      • Up to $18,500, or $24,500 if you are 50 or over!
    • Contribute up to $55,000 into a SEP IRA for  2018
      • This is only applicable to those who are self-employed.
    • Miss the December 31st deadline? You can still contribute to your IRA and get a tax deduction.
      • This tip is good until the tax filing deadline, up to $5,500 or $6,500 if you are 50 or over.
    • Contributing to your retirement may also make you eligible for a Saver’s Credit of up to $1,000 (or $2,000 if you are married and filing jointly)!
  • Be Generous
    • Instead of donating cash, choose appreciated stock or property to supercharge your tax benefits.
    • You get DOUBLE the benefit if you have owned the asset for more than one year, by deducting the property’s marked value on the date of the gift. This way, you also avoid paying capital gains tax on the appreciation.
    • It’s important to remember that you MUST have a receipt to back up any contribution of any amount.
  • Pre-Pay for College
    • If you pay for college courses for the first quarter/semester of 2019 by December 31st, you may be eligible for the Lifetime Learning Credit of up to $2,000 per return.
    • This may also be applicable if you are paying for another college student in your family.
      • This would be through the American Opportunity Tax Credit of up to $2,500 for the first four years of college.
    • Student loan interest can also be deducted up to $2,500 if you are making payments.
  • Loss Harvesting
    • Sell investments to offset taxable gains – dollar for dollar.
    • If you still have a net loss, up to $3,000 can reduce other taxable income.
      • More than $3,000 can be carried over to the next tax year!
  • Postpone Income
    • While it may be difficult to postpone wages or salaries, try to defer a year-end bonus to be paid out in January. Just make sure this is standard practice for your company.
    • If you are self-employed or are a freelancer/consultant, you can delay billings until late December to ensure you don’t receive payment until 2019.
    • Keep in mind that if you anticipate additional income for the 2019 tax year, it could push you into a higher tax bracket. In that scenario, you may end up paying higher taxes next year, so use this tip with caution.
  • Make the Most of Your Flex Spending Account
    • Flex accounts avoid income tax and social security taxes. As you may know, you lose anything you don’t use.
    • Your employer may allow you to spend money set aside in 2018 as late as March 15, 2019, if they have a grace period as permitted by the IRS.
    • If all else fails, you can try using up your funds before the end of the year to avoid losing the excess.
  • Maximize Deductions if You Can No Longer Itemize
    • The standard deduction has increased this year, up to $12,000 (or $24,000 if you are married and filing jointly). If your deductions are right at those max amounts, here are some options for you:
      • Donate more to charity
      • Use donor-advised funds for charitable donations, instead of bunching donations – you can recommend how to distribute the money to your favorite charity.
      • Bunch itemized deductions, but keep an eye on anything that is deductible over 7.5 percent of your AGI for 2018. If you are almost there, getting in a last minute doctor visit can help.

These following apply to deductions that have been eliminated.

  • Moving Expenses
    • The new tax laws do not allow job-related moving expenses to be deducted unless you are an active duty member of the military. Instead, negotiate a moving reimbursement with your employer.
    • Keep in mind that you can still deduct mortgage interest and property taxes.
      • There is a cap of $10,000 for property taxes, state income, and state and local taxes combined.
  • Dependent Exemption
    • The $4,050 dependent exemption is no longer allowed. However, if you send your kids to camp over the holidays while you work, you can get a Child and Dependent Care Credit of up to $1,050 for one child or $2,100 for two or more children.
    • The child tax credit has also been doubled to $2,000 per dependent under 17.
  • Employee Expenses That Are Not Reimbursed
    • Itemization of miscellaneous expenses, such as for classes, have been eliminated.
    • You can still take advantage of educational tax credit like the American Opportunity Tax Credit (up to $2,500) or the Lifetime Learning Credit (up to $2,000).
Posted in: Financial Tips, News to Know, Tax, Tax Deductions and Credits, Tax Rates ⋅ Tagged: , , , , ,

Tax Rates & Deductions- 2015 Returns

01/26/2016 12:59 AM ⋅

TAX RATES & DEDUCTIONS FOR 2015 TAX RETURNS/ FILED IN 2016:

TAX RATES:

SINGLE: TAXABLE INCOME
0 to 9225                   X           10%          Minus         0.00                 Equals TAX
9226 to 37450           X           15%          Minus         461.25             Equals TAX
37451 to 90750         X           25%          Minus         4206.25           Equals TAX
90751 to 189300       X           28%          Minus         6928.75           Equals TAX
189301 to 411500     X           33%          Minus         16393.75         Equals TAX
411501 to 413200     X           35%          Minus         24623.75         Equals TAX
413201 and up          X           39.60%     Minus         43630.95         Equals TAX

MFJ/QW:TAXABLE INCOME
0 to 18450                 X           10%          Minus         0.00                 Equals TAX
18451 to 74900         X           15%          Minus         922.50             Equals TAX
74901 to 151200       X           25%          Minus         8412.50           Equals TAX
151201 to 230450     X           28%          Minus         12948.50         Equals TAX
230451 to 411500     X           33%          Minus         24471.50         Equals TAX
411501 to 464850     X           35%          Minus         32701.00         Equals TAX
464851 and up          X           39.60%     Minus         54084.10         Equals TAX

HOH: TAXABLE INCOME
0 to 13150                 X           10%          Minus         0.00                 Equals TAX
13151 to 50200         X           15%          Minus         657.50             Equals TAX
50201 to 129600       X           25%          Minus         5677.50           Equals TAX
129601 to 209850     X           28%          Minus         9565.50           Equals TAX
209851 to 411500     X           33%          Minus         20058.00         Equals TAX
411501 to 439000     X           35%          Minus         28288.00         Equals TAX
439001 and up          X           39.60%     Minus         48482.00         Equals TAX

MFS: TAXABLE INCOME
0 to 9225                   X           10%          Minus         0.00                 Equals TAX
9226 to 37450           X           15%          Minus         461.25             Equals TAX
37451 to 75600         X           25%          Minus         4206.25           Equals TAX
75601 to 115225       X           28%          Minus         6474.25           Equals TAX
115226 to 205750     X           33%          Minus         12235.50         Equals TAX
205751 to 232425     X           35%          Minus         16350.50         Equals TAX
232426 and up          X           39.60%     Minus         27042.05         Equals TAX

STANDARD DEDUCTIONS:

SINGLE/MFS             6300
MFJ/QW                    12600
HOH                           9250

Additional added if 65 or older or blind/per person, per event:
MFJ/QW/MFS            plus 1250
S/HOH                       plus 1550

PERSONAL EXEMPTIONS:      4000 Per Person

STANDARD MILEAGE RATES:

BUSINESS                 57.5 Cents per Mile
CHARITABLE            14 Cents per Mile
MEDICAL                   23 Cents per Mile
MOVING                    23 Cents per Mile

EIC MAXIMUM INCOME LIMITS:
CHILDREN:           NONE              1                 2                  3
MFJ                       20330        44651        49974          53267
S/HOH/QW           14820        39131         44454         47747

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Education Credits – Items Needed

02/18/2014 7:18 PM ⋅

Educational Credits – Items Needed

Educational Credits can be confusing. Here is a list to help you gather the information you will need to bring to figure the credit properly:

Students need a 1098T from each school attended. Printing this out from the school’s website is usually best because it often contains more details.

This can also sometimes be printed from 1098t.com for just the form.

Also, it is best to bring a print out of the school account statements showing charges (tuition, fees, room & board, other expenses) and credits (scholarships, grants, payments, adjustments, etc.) for each term/semester attended (Spring, Summer, Fall (current tax year) and Spring (next year)) because sometimes this is included and/or has adjustments needed to calculate the credit properly. This is usually available on the school’s website. Even if you do not receive a 1098T, this statement is still necessary.

Also, the amount spent for book and supplies (calculator, specific software, art supplies, etc.) required for classes during the current tax year are needed. It is best to keep receipts.

Out-of-pocket expenses include those paid for with a student loan or paid by another person for the student, such as by a parent or grandparent.

Note if any of the scholarships or grants received are for a specified use- ex. books, room & board, etc. Scholarships received/used for room & board are taxable to the student.

It is also important to know what years the American Opportunity Credit or Hope Credit have previously been claimed for the student.

Also, bring information for any student loan interest paid or distributions received from an Educational Savings Plan.

 

Posted in: Education Credits, Financial Tips, News to Know, Tax Deductions and Credits ⋅ Tagged: , , , ,