With the Holiday spirit in the air, it may sound absurd to think about tax tips. However, if you consider tax season tips, it will give you certain advantages in the coming year when it is time to file your taxes. You can avail of depreciation costs, defer your income, accelerate tax deductions, bigger sales tax deductions, lower contribution limit for IRA plans,reimbursem*nt of your costs for dependent care services are just a few benefits you can avail by following these tips. This is what you can find out.
Essential Tax Tips for the Holidays You Need to Do
Taxes can be expensive and confusing so we’ve rounded up these 11 essential tax tips that you must know as a taxpayer.
Tip 1. Sell Assets
Tax impact of disposing of capital assets?
- Changes, like scrapping, selling, or removing a capital asset from your business, need to be reported to the IRS.
- GOOD NEWS: Long-term capital gains are taxed at a lower rate than other income.
- BAD NEWS: You may have ordinary income from expensing or depreciation.
Tip 2. Improve Your Home
Repair vs. Improvement
- Improvements add value to the home, prolong the life of the home or adapt it to new uses.
- Repairing is something that simply keeps your home properly maintained.
Add to the Tax Basis
- Improvements may reduce the tax you owe if you sell your home for a profit!
- Home improvement costs can also add to the value of your home! The tax basis of any asset is usually the cost but when you buy a house.
Depreciate the Costs
- Using a portion of your home can also depreciate home improvement costs.
- Once you qualify, you can deduct the cost of any improvements you make to that part of your home.
- Renting out part of your home can also depreciate your home improvement costs.
Tip 3. Spend Your FSA
Health FSA
- Reimbursem*nt of qualifying out-of-pocket medical expenses.
- Can be issued as a debit card for use on qualified services and items.
- A full year’s worth of deductions will be available for you to use on medical expenses when the plan starts.
- If your employer offers a general purpose FSA, you can use it for any eligible health expense.
Dependent Care FSA
- Reimbursem*nt for dependent care services expenses.
Tip 4. Be Charitable
#ICYMI @CharityNav shared 5 easy steps to being a more informed giver this holiday season. Check it out & share it with your family and friends! https://t.co/MeZzTRb9qv pic.twitter.com/bmdCZPgz1j
— Charity Navigator (@CharityNav) November 30, 2017
- You may be entitled to a charitable contribution deduction against your income tax if your donation is made to certain qualified charities.
- Donate old equipment, furniture, and clothes that you no longer use instead of throwing them out.
- Document donations and contributions.
Tip 5. Do a Mock Return
- Get an estimate of how much your tax will be by entering as much information as you can on your trial return
- Use your most recent pay stub for withholding tax and income data.
- Check the websites of your tax-related accounts.
- Fill-in all necessary information on the IRS forms.
Tip 6. Defer Income
- If you’re expecting a big bill on a certain year, consider deferring income from that year.
- If you’re self-employed, use a tracker to time your jobs including those you are billing for.
- If you’re an employee, if possible, when you get a bonus, ask your boss to give it to you early next year.
Tip 7. Make House Payments Early
- Consider paying for next year’s real estate taxes early so you can write off the expense this year.
- Pay for your property taxes early to accelerate your tax deductions for the year.
- As long as your income is within the limits, you don’t have to pay the alternative minimum tax when paying for your property taxes early.
Tip 8. Bunch Your Expenses
- Set up a bunching strategy to maximize deductions.
- Push as many of your allowable expenses into one tax year as you can.
Tip 9. Buy a Car
- If you’re in the market for a new car, consider buying one by December 31.
- You’ll pay less, as dealerships are ready to bargain to clear their lots.
- It will give you a bigger sales tax deduction when you file your taxes next year.
Tip 10. Get Ready To Retire
- Although they are offered at different times, most retirement accounts have tax benefits. The main difference is whether contributions are considered to be tax deductible.
- The 3 main types of retirement investment options:
401(k)- Offered by many employers in the private sector
- You can contribute a reasonable amount toward your retirement
403(b)
- Similar to the 401(k), and with the same limits
- Generally offered to state and non-profit employees
Individual Retirement Account (IRA)
- You can open an IRA on your own
- Contribution limit is lower
Tip 11. Hire a Pro
- Consider whether you will need some tax help, for setting up a tax planning strategy early.
- Take the time to figure out just what professional tax help you need.
- Don’t hire someone whose fee is tied to how much of a refund you’ll get.
Keep these essential tax tips in mind and you can’t go wrong! Watch this video:
For more tips on how to manage your taxes, visit taxhelpsol.wpengine.com
So before you go full blast with your holiday cheers, why not apply some or, if not all, these tax tips this holidays season? You will reap what you sow, and if you start sowing today you will be reaping the rewards next year. Have a jolly season!
What do you think about these tax tips? Let us know in the comments section below.
Up Next:Personal Income Tax Tips & Tricks You Must Do Before December 31
FAQs
A19. If you enroll in an employer-sponsored plan, including retiree coverage, that is minimum essential coverage you are not eligible for the Premium Tax Credit for your Marketplace coverage, even if the employer plan is unaffordable or fails to provide minimum value.
Do you have to pay back tax credit for health insurance? ›
If at the end of the year you've taken more premium tax credit in advance than you're due based on your final income, you'll have to pay back the excess when you file your federal tax return. If you've taken less than you qualify for, you'll get the difference back.
How do I claim tip outs on my taxes? ›
You should keep a daily record of all tips you receive from customers and from other employees who tip out to you and the amounts you tip out to other employees. If you don't have records or if you have inadequate records, you must report the full amount in box 8 as income on your income tax return.
How do you negotiate tax relief? ›
The IRS has a special form that you need to complete when proposing a compromise, and it charges a $186 filing fee. The form requires detailed information about your income, spending habits, assets, and any equity you might have in investments.
What is the formula for the premium tax credit? ›
Calculation of the Federal Advance Premium Tax Credit
The APTC equals the difference between (1) the cost of the “second-lowest cost silver plan” available to you (based on your age, family size, and county of residence) and (2) the maximum amount you are expected to pay towards your health insurance premiums.
How much do I have to pay back of premium tax credit? ›
The amount of APTC you'll have to repay will depend on how much excess APTC was paid on your behalf, your household income, and your tax filing status. If your household income (MAGI) is at least 400% of the previous year's federal poverty level (FPL), you'll have to repay all of the excess APTC.
Do you get more tax return if you have health insurance? ›
Health insurance can impact your tax return in several ways, including through the Premium Tax Credit (PTC) and the Individual Shared Responsibility Payment (ISRP). The Premium Tax Credit can lower your out-of-pocket health insurance costs if you meet certain income and coverage criteria.
Why am I getting a tax credit for health insurance? ›
Your tax credit is based on the income estimate and household information you put on your Marketplace application. Income between 100% and 400% FPL: If your income is in this range, in all states you qualify for premium tax credits that lower your monthly premium for a Marketplace health insurance plan.
What tax deductions can I claim? ›
Examples of itemized deductions include deductions for unreimbursed medical expenses, charitable donations, and mortgage interest. Whether you choose to itemize or take the standard deduction depends largely on which route will save you more money.
What are box 7 social security tips? ›
If you receive $20 or more per month in cash tips, report that income to your employer. Your employer will report your tip income on your W-2, Box 7 (Social Security tips). The law assumes an average tip rate of 8%, and it expects employees to report tips at least 8% of the gross food and drink sales.
All tips you receive are income and are subject to federal income tax. You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement.
What happens if you don't report cash tips? ›
Tips are taxable income, and a failure to properly report your tip income could lead to the following issues: IRS audit of your return. Back taxes owed. Interest and penalties added to your tax debt.
What is the IRS 6 year rule? ›
6 years - If you don't report income that you should have reported, and it's more than 25% of the gross income shown on the return, or it's attributable to foreign financial assets and is more than $5,000, the time to assess tax is 6 years from the date you filed the return.
How much will the IRS usually settle for? ›
How much will the IRS settle for? The IRS will often settle for what it deems you can feasibly pay. To determine this, the agency will take into account your assets (home, car, etc.), your income, your monthly expenses (rent, utilities, child care, etc.), your savings, and more.
Does the IRS forgive tax debt after 10 years? ›
Yes, after 10 years, the IRS forgives tax debt.
However, it is important to note that there are certain circ*mstances, such as bankruptcy or certain collection activities, which may extend the statute of limitations.
What is the highest income to qualify for ACA? ›
The income range is $30,000 to $120,000 in 2024 for a family of four. (Income limits may be higher in Alaska and Hawaii because the federal poverty level is higher in those states.) The American Rescue Plan Act of 2021 also extended subsidy eligibility to some people earning more than 400% of the federal poverty level.
Who is eligible for the premium tax credit in 2024? ›
To be eligible to receive the PTC, individuals must meet the following criteria: • file federal income tax returns; • enroll in a plan through an individual exchange; • have annual household income at or above 100% of the federal poverty level (FPL)5 for tax year 2024;6 and • not be eligible for minimum essential ...
Which of the following statements is a requirement for eligibility of the premium tax credit (PTC)? ›
You must meet all of the following criteria to qualify for the premium tax credit: You must get your health care coverage through the Marketplace. You can't be eligible for health care coverage through alternative options such as your employer or the government. Your income needs to fall within a certain range.
How do I avoid premium tax credit repayment? ›
How can I avoid it?
- A marriage or divorce.
- Having a baby, adopting a child, or placing a child for adoption or foster care.
- A child on your policy turning 26 or a dependent changing status so they're no longer your dependent.
- The death of anyone in your household.
- Changes to income.
