The money contributed to a Health Savings Account (HSA) is 100% tax-deductible. This means that any
contributions will lower your taxable income. The interest earned on money in an HSA is 100% tax-
deferred. This means the money in the account can continue to grow without being taxed. Withdrawals
that are used toward qualified medical expenses are 100% tax-free. These expenses include
deductibles, copays, prescriptions, vision, and dental costs.
If there is an outstanding tax debt at the time of death, the IRS can place a federal lien against the
estate. The taxes must then be paid before any other debts or accounts. If this is not done, then the IRS
can pursue payment from the legal representative of the deceased person. Unpaid federal taxes have a
lifespan of ten years. If the tax debt exceeds ten years, then this is no longer able to be collected. If the
debt is under ten years, the family of the deceased will be liable for payment to the IRS.
There are many tax advantages for homeowners, particularly when itemizing your taxes. If you have a mortgage on your home the interest paid each year can be deducted from your taxable income. This is only available if you are itemizing your taxes, as opposed to taking the standard deduction. If you have a home equity loan, this interest can also be deducted when filing your taxes. For those self-employed individuals, the space in the home used for business purposes can be deducted including heat, utilities, and insurance, saving you money on your overall tax bill.
One of the best ways to make sure you get your tax refund as quickly as possible is to file your return electronically. This eliminates the time during transit, getting your tax return at the front of the line. There is a significant backlog for paper returns and yours is unlikely to be prioritized. You should also request a direct deposit for your refund, instead of waiting for a check to be mailed.
For those who are self-employed, health insurance premiums paid throughout the year can be deducted on their taxes. Even if you do not item deductions on Schedule A, these health insurance premiums can still be deducted on your tax return. For W-2 employees you can deduct out-of-pocket medical expenses and health insurance premiums only if you take the itemized deduction on your tax return. Employees looking to take this deduction can only do so if these premiums and other medical expenses when the amount exceeds 7.5% of your Adjusted Gross Income.
Family-owned businesses have many tax advantages when employing family members. Money paid to family members reduces the net income of the business, thereby reducing the overall tax burden. In addition, insurance costs and other benefits offered to the employed family members can also be deducted from the business’ profits as an expense. When a parent is the sole proprietor and the business is not incorporated when children under the age of 18 are employed, neither the business nor the employed minor are required to pay FICA taxes. Having a family member on payroll, whether a minor child or spouse, can significantly reduce the amount of taxes owed at the end of the year.
With the prevalence of money exchanged on Venmo, PayPal, and other cash apps, the IRS has stated that it will be cracking down on those receiving cash app money exceeding $600 in the calendar year. The threshold for receiving third-party payments is $600. When the amount exceeds this, the recipient is required to file a 1099-K. In past years Form 1099-K was only required for gross income from cash apps exceeding $20,000 or more than 200 separate transactions during the calendar year. This change will affect many sellers who receive payment through these cash apps.
Capital losses from the sale of stock, mutual funds, and other investments can help to reduce your tax bill. If you had any capital gains over the year, this loss will first be used to offset the taxes paid on these gains. For those years where you are still at a capital loss, this deduction can reduce taxes on other income, including salary and interest. This excess deduction is capped at $3,000 per year. Any more than that amount can be carried over into subsequent years as a future tax deduction.
Any charitable donation that offers you something in return as the donating person is not tax-deductible. This includes money spent on charitable fundraisers where there is a prize, such as a raffle or drawing, is not tax-deductible. Similarly, a donation that is to purchase a product for your own use, such as cookies, wrapping paper, or another item is not considered a charitable deduction. When itemizing charitable deductions on your taxes, keep in mind that these donations cannot be from which you have receive an item yourself, including a chance to win something.
When claiming the home office deduction on your taxes you can use the simple or regular method for calculating your deduction. To determine which is the best calculation, you will want to determine which of the two will offer you the larger deduction. With the simplified method, you would complete a Simplified Method Worksheet, supplied by the IRS. This will require you to indicate the square footage of your business space in the home among other factors to determine the deduction amount. The regular deduction method uses Form 8829 and factors in mortgage interest, real estate taxes, insurance, and utilities to determine the deduction amount.