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What To Claim On Taxes

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Child And Dependent Care Credit

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Working parents can claim this credit for costs they spent on child care while they actively looked for a job. You can include the cost of a housekeeper, maid, cook, cleaner, or babysitter. However, the credit is only worth up to 35% of your expenses. The maximum credit is $3,000 if you have one dependent under 13, and $6,000 for two or more dependents. Claim this credit with Form 2441 and Schedule 3. You can get necessary information from your care provider with Form W-10. The care provider doesnât qualify if theyâre your spouse or dependent.

What You Should Know About Tax Withholding

To understand how allowances worked, it helps first to understand how tax withholding works. Whenever you get paid, your employer removes, or withholds, a certain amount of money from your paycheck. This withholding covers your taxes, so that instead of paying your taxes with one lump sum during tax season, you pay them gradually throughout the year. Employers in every state must withhold money for federal income taxes. Some states, cities and other municipal governments also require tax withholding.

Withholding is also necessary for pensioners and individuals with other earnings, such as from gambling, bonuses or commissions. If youre a business owner, independent contractor or otherwise self-employed, you will need to make sure you withhold taxes yourself. You can do this by paying estimated taxes.

Exactly how much your employer withholds will depend largely on how much money you make and how you fill out your W-4. While you used to be able to claim allowances, your withholding is now affected by your claimed dependents, if your spouse works or if you have multiple jobs. You can also list other adjustments, such as deductions and other withholdings.

When you fill out your W-4, you are telling your employer how much to withhold from your pay. Thats why you need to fill out a new W-4 anytime you start a new job or experience a big life change like a marriage or the adoption of a child.

What Medical Expenses Are Tax

Heres a list of the medical expenses that are tax-deductible.

  • Travel expenses to and from medical treatments. For 2020 taxes, the medical travel rate is 17 cents per mile, down from 20 cents per mile in 2019.
  • Insurance costs, including premiums, co-insurance and co-pays, from already-taxed income. This includes the cost of long-term care insurance, up to certain limits based on your age.
  • Uninsured medical expenses, such as an extra pair of eyeglasses or set of contact lenses, false teeth, hearing aids and artificial limbs.
  • Costs of alcohol- or drug-abuse treatments.
  • Eye surgery, such as Lasik, when it is not just for cosmetic purposes.
  • Medically necessary costs prescribed by a physician. For example, if your doctor recommended you put a humidifier in your home to help with breathing problems, the humidifier and additional electricity costs could be at least partially deductible.
  • Some medical conference costs. You can count admission and transportation expenses to the conference if it concerns a chronic illness that afflicts you, your spouse or a dependent. Meals and lodging costs while at the seminar, however, are not deductible.
  • Weight-loss programs for a specific disease diagnosed by a physician, such as obesity or hypertension.

Two major benefits of the medical FSA:

  • All medical expenses up to the limit receive the effective tax deduction.
  • The FSA eliminates the requirement of itemizing deductions to receive tax benefits.

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Tax Cuts And Jobs Act Rule Changes

In 2020, the decision to consider itemizing comes with a big caveat, due to changes brought about by the Tax Cuts and Jobs Act of 2017 . Before you go to the trouble of filling out that Schedule A form, keep in mind that the standard deductions, which increased significantly in 2018, have all been bumped up a bit more. In 2020, the standard deductions are $12,400 for individuals and married individuals filing separately, $18,650 for heads of household, and $24,800 for married couples filing jointly or qualifying widows. For the 2021 tax year, the standard deductions will rise againto $12,550, $18,800, and $25,100 respectively.

Note that the TCJA also did away with the personal exemption, so you should factor that into your calculations. The law also eliminated or changed the rules for, a number of tax deductions that you were able to take in 2017. On the other hand, the TCJA no longer limits overall itemized deductions according to your adjusted gross income , which is at least one positive change for itemizers.

If your total itemized deductions under the new tax bill fall below the amounts listed above, youre likely better off taking the standard deduction. If not, read on to learn about the most overlooked itemized deductions and how they can help you save even more.

Is It Better To Have More Earned Income Withheld Just To Play It Safe

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Choosing to have too much tax withheld may feel safer and easier than figuring out how much you should withhold and how to complete the form. However, theres nothing safe about letting the IRS hold your money for a year or more completely interest-free. The small investment of time to make sure your income tax withholding is correct is well worth it.

At the same time, some taxpayers dont want to risk having a tax bill at the end of the year no matter how small. If thats how you feel, adjust accordingly, provide your revised W-4 form to your employer, and plan for a small tax refund.

You can still celebrate when you get your tax refund check. Plus you can be happy knowing you didnt have too much tax withheld.

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How To Claim Solar Tax Credit

To claim the credit, you must file IRS Form 5695 as part of your tax return. Youll calculate the credit on Part I of the form, and then enter the result on your 1040. Currently, the residential solar tax credit is set to expire at the end of 2023.

Can you get a tax deduction for a solar loan?

  • So with such a high cost, is there a possibility to get a tax deduction for a solar loan? Fortunately, the federal government offers some help, giving you a 30% tax credit on the installation costs through 2019, after which it drops to 26% in 2020, 22% in 2021, and nothing after that.

Why Would I Want To Check The Married But Withhold As Single Box

You generally have less Federal taxes withheld when you check the Married box. Thats because the withholding tables assume you are married filing jointly with a non-working spouse.

If your spouse has a significant income, you may need to check the Married but withhold at higher Single rate box to have enough taxable income withheld.

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Deduction For Personal Property Rental

If you donât work in a line of business that involves renting out your personal property, such as a car, but you still earn some side income from renting out your property, you can deduct expenses related to that rental income. For example, you may be able to deduct gas from renting out your car. Use Schedule 1 to claim this deduction.

Other Deductible Medical Expenses

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If you have special needs, there are other costs you can write off, such as the cost of a wheelchair, crutches, equipment that enables a deaf person to use a telephone or devices that provide television closed-captioning. Dont forget guide dogs for the blind or hearing-impaired, or the costs to retrofit your car with special hand controls or space to hold a wheelchair.

If you make renovations to your home for medical reasons, you can deduct the cost as a medical expense. Expenses related to making your home more accessible for a disabled resident also are deductible, but you likely wont be able to write off the full costs.

Aging-in-place home remodels you can write off, include:

  • Installing ramps.
  • Widening doors and hallways, and lowering counters and cabinets.
  • Adjusting electrical outlets and fixtures.
  • Grading exterior landscape to ease access to the house.
  • Adding a chairlift to get up and down stairs.

If the improvement increases the value of your property, that amount is subtracted from the projects cost and the difference counts as a medical expense.

Heres an example. Lets say you spend $60,000 to install an elevator in your home because you have a heart problem and cant walk flights of stairs anymore. Your home was worth $200,000 the elevator raised the value to $240,000. The cost of the elevator minus the increase in your home value is what you can deduct in this case, $20,000.

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What To Know About The 2020 W4

The 2019 W4 will undergo some key design changes in 2020, an effort by the IRS to reduce the forms complexity and make the withholding process more accurate and transparent.

With the redesigned 2020 W 4, you will no longer face complicated or confusing worksheets for determining which allowances youre eligible for. Instead, the new design will present simpler, more straightforward questions to ensure withholding is accurate and easier than ever.

The IRS 2020 Form W4 FAQ page provides some helpful info on what to expect with the new design rollout.

If you need more help filling out your W4, consult your local Liberty Tax® professional today. Be sure to follow us on and to keep up with important tax information!

Should I Claim 1 Or 0 On My W 4 Tax Form

The total number of exemptions you are claiming should be based on your filing status . However, knowing if you should claim 1 or 0 on your W4 tax form also depends on how much money you want in your hands each new paydayas well as the tax burden youre willing to face when its time to file.

In the event you claim 0 federal withholding allowances instead of 1 on your W 4 tax form, youll receive less money every paycheck, though your tax bill will likely be reduced at the end of the year. When you claim 1, youll benefit from higher take-home pay but will probably face a higher bill when tax time comes around.

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Staying Healthy Gives Deductions A Leg Up

Staying healthy can cost you an arm and a leg. The IRS allows you a deduction specifically for medical expenses but only for the portion of expenses that exceed 7.5% of your AGI. Thus, if your AGI is $50,000 in 2020, you can only deduct the portion of your medical expenses over $3,750. If your insurance company reimburses you for any part of your expenses, that amount cannot be deducted. Additionally, if insurance reimburses you in a future tax year for any portion of expenses claimed in the current year, you will need to add the reimbursement as income in the future year.

A portion of money you pay for long-term care insurance can also minimize your tax burden. Long-term care insurance is a deductible medical expense, and the IRS lets you deduct an increasing portion of your premium as you get older, but only if the insurance is not subsidized by your employer or your spouses employer.

Contributions to health savings accounts s are tax-deductible. If you have a self-only high-deductible health plan , you can contribute up to $3,550 in 2020 . If you have a family HDHP, you can contribute up to $7,100 .

Should You Itemize Or Take The Standard Deduction

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Heres what the choice boils down to:

  • If your standard deduction is less than the sum of your itemized deductions, you probably should itemize and save money. Beware, however, that itemizing usually takes more time, requires more forms and you’ll need to have proof that you’re entitled to the deductions.

  • If your standard deduction is more than the sum of your itemized deductions, it might be worth it to take the standard deduction .

Note: The standard deduction has gone up significantly in recent years, so you might find that it’s the better option for you now even if you’ve itemized in the past.

Your tax software or tax advisor can run your return both ways to see which method produces a lower tax bill.

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Can You Claim 18 Year Old On Taxes

Can you claim 18 year old on taxes? To meet the qualifying child test, your child must be younger than you and either younger than 19 years old or be a student younger than 24 years old as of the end of the calendar year. Theres no age limit if your child is permanently and totally disabled or meets the qualifying relative test.

Why cant I claim my 18 year old on my taxes? If your 18-year old is living on his own and not a student, you can no longer claim him on your taxes. If your child is legally emancipated, you cant claim him as a dependent. If your child supplies more than half of his own support, you arent entitled to list him as a dependent.

Can parents claim you on taxes after 18? You must be under the age of 19 for your parents to claim you as a dependent. However, if you are a full-time student, you must be under age 24 in order for your parents to claim you as a dependent. If you are totally and permanently disabled, there is no age limit for your parents to claim you as a dependent.

How much tax credit do you get for a dependent over 18? How can dependents between ages 18 and 24 qualify? If you have 18-year-old dependents, they can qualify for up to $500 each toward the child tax credit amount youll receive.

Do I Qualify For Eitc

You qualify for EITC if:

  • You have earned income and adjusted gross income within certain limits AND

  • You meet certain basic rules AND

You either:

  • Meet the rules for those without a qualifying child OR

  • Have a child who meets all the qualifying rules for you or your spouse if you file a joint return.

EITC has special rules for:

  • The amount of credit you may receive

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American Opportunity Tax Education Credit

The American Opportunity Tax Credit gives credits for the first four years of higher education. The maximum annual credit is $2,500 for each eligible student. If the amount of taxes that you owe is zero because of this credit, the IRS says 40% of any remaining amount of the credit can be refunded to you. The credit is worth 100% of the first $2,000 of qualified education expenses paid for each eligible student and 25% of the next $2,000 of qualified education expenses.

If you, your spouse, or child are in school, make sure to look deeper into education credits, Fan says. For students who are in the first four years of college, this credit could provide a greater tax savings than the Lifetime Learning Credit.

Qualifying expenses include tuition, fee payments and required books or supplies for post-secondary education for yourself, spouse or dependent child. The credit is reduced if the modified adjusted gross income is between $80,000 but less than $90,000 for a single filer and $160,000 but less than $180,000 if married filing jointly. This credit can not be claimed the same year that the Lifetime Learning Credit is claimed.

Can A 16 Year Old Have His Own Car Insurance

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Can a 16-year-old get car insurance? In most states, drivers who are minors cannot get their own car insurance policy. Drivers must be the age of majority, usually, 18, to get their own auto insurance policy. An insurance policy is considered a contract and a company cannot legally enter into a contract with a minor.

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What To Do If You Have Tax Owing

2020 was a financially rough year for many Canadians, and the federal government stepped in where they could and offered benefits to those who were struggling to make ends meet during the COVID-19 pandemic. What many Canadians failed to realize, is that those benefits were taxable. As a result, you may find yourself not getting money back at tax time, but instead, youll owe a portion of your benefits back to the government. Heres what to do if you suspect you may owe money at tax time.

  • Prepare your return promptly if you think you might owe money at tax time, prepare your return as soon as possible. Preparing early will show you exactly how much you owe, and give you time to plan to pay it back
  • File on time if you owe a tax balance, dont delay filing because of it. Filing after the deadline results in a late filing penalty and wont affect your taxes owing youll need to pay those anyway.
  • Make a plan to pay your taxes if you dont have the cash on hand to pay your tax bill, consider tapping your cash resources. Emergency funds are there for a reason and paying an outstanding tax bill is one of them.
  • Consider paying in installments If you dont have the cash on hand to pay your tax bill, consider making payments in installments. The Canada Revenue Agency will charge interest on your outstanding balance, but the interest rate is low.

What Is The Standard Deduction

The standard deduction is an automatic deduction of your taxable income that you can receive without doing any itemized deductions.

If youre trying to decide whether to use the standard deduction amount or try to get more by doing itemized deductions, it is important to remember that under former President Donald Trump, a new tax law was introduced called the Tax Cuts and Jobs Act starting in tax year 2018. This act significantly raised the standard deduction amount for both households filing together and single individuals filing alone, Fan says.

The standard deduction for married filing jointly nearly doubled to $24,800 for tax year 2020, up $400 from the previous year. The standard deduction increased to $12,400 in for 2020, up $200 for single taxpayers and married individuals filing separately. For heads of households, the standard deduction will be $18,650 for tax year 2020, an increase of $300.

Before the TCJA was passed in 2017, the amount was $6,350 for single filers and $12,700 for married filing jointly.

Since the standard deduction amounts rose so much, it does make it harder for people to have enough expenses to be able to itemize deductions, he says.

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