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David Gardner: Final-minute tax suggestions

This time of 12 months we’re busy reviewing consumer tax returns, whether or not self-prepared or executed professionally. Most of…

By Staff , in Retirement Accounts , at April 4, 2022

This time of 12 months we’re busy reviewing consumer tax returns, whether or not self-prepared or executed professionally. Most of our tax discussions revolve round proactive planning, however for them to be efficient, we should work carefully with the tax preparer. This tax 12 months, right here’s what I’ve seen as the commonest alternatives for taxpayers to spice up their refund.

David GardnerFor the Digicam

Charitable deduction accessible with out itemizing. When the Tax Cuts and Job Act handed in 2017, key modifications within the tax code meant that fewer than 10% of taxpayers now itemize deductions. Meaning no deductions for mortgage curiosity, state and native taxes, and charitable contributions. The excellent news is for 2021 solely taxpayers can deduct as much as $300 (single filers) or $600 (married submitting collectively) for money donations to most charities in the event that they don’t itemize their deductions.

In the event you stopped monitoring your money donations, I counsel you dig out your receipts for 2021 for some doable tax financial savings. You must also know that Colorado (and choose different states) allow you to deduct charitable contributions in your state taxes in most years, even in the event you’re not itemizing your deductions.

Stimulus spherical three. About this time final 12 months, President Joe Biden signed the American Rescue Plan Act that approved a $1,400 federal tax credit score for people in households under sure earnings limits, from $75,000 for single filers to $150,000 to married {couples} submitting collectively. Most certified for these credit mechanically by means of their 2019 or 2020 tax returns. However for these whose incomes exceeded the boundaries in earlier returns, the 2021 tax return represents the ultimate alternative.

Baby tax credit have been additionally elevated by means of this identical laws to as much as $3,600 per qualifying little one ages 6 and below and $3,000 for older youngsters by means of age 17, topic to earnings limits. In the event you didn’t obtain these credit mechanically deposited into your checking account, you might qualify for them once you file for 2021.

Retirement plan for self-employed employees. A standard response of entrepreneurs who’ve their first worthwhile 12 months is elation. That feeling of abundance can come crashing down once they put together their taxes and see that they owe not solely earnings taxes on their earnings, but additionally self-employment taxes within the type of Social Security and Medicare taxes. Most new enterprise house owners aren’t anticipating that 15.3% further tax hit.

Happily, we now have the choice of implementing a solo 401(okay) plan. Identical to a retirement plan at a much bigger employer, a solo 401(okay) permits enterprise house owners with out full-time workers to ascertain a 401(okay) for little cost at most custodians. A solo 401(okay) might allow you to place apart as much as $58,000 a 12 months pre-tax for 2021, relying on the earnings of your online business. Those that had at the very least turned 50 by final 12 months might qualify to place apart an extra $6,500.

Whereas these particular person retirement plans aren’t new, it’s solely lately that the IRS has permitted small enterprise house owners to arrange these plans for the earlier calendar 12 months if the plan is established earlier than the tax submitting date, together with extensions. Meaning a sole proprietor might set up a plan as late as October of this 12 months to cut back their taxable earnings for 2021. This offers the solo employee the chance to place a plan in place now to save lots of on final 12 months’s taxes.

Marshall Hearth and straight-line wind tax modifications. In the event you learn the Presidential declaration popping out of the Marshall Hearth, it says all taxpayers in Boulder County who have been affected by the winds or fireplace are eligible for delaying the fee and submitting of their taxes till Might 16. I wouldn’t advocate profiting from the additional month except you want it, provided that I’ve seen routine correspondence with the IRS grow to be extra problematic.

Those that have suffered monetary setbacks as a result of disaster could possibly deduct their unreimbursed losses on their 2021 return. Any losses can also be carried again to an amended 2020 tax return if that may be extra advantageous to you. Working with an skilled tax preparer may help make sure you’re taking full benefit of those methods.

David Gardner is an authorized monetary planner skilled at Mercer Advisors training in Boulder County. The opinions expressed by the writer are his personal and aren’t supposed to function particular monetary, accounting, or tax recommendation. They mirror the judgment of the writer as of the date of publication and are topic to vary.

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