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How Do EV Tax Deductions Work?

Milford, NH Resident Has Questions

The EV tax credit is a federal tax advantage for those that purchase a new or used electric vehicle. New electric vehicles can offer a tax deduction of up to $7,500, while car buyers purchasing a used EV may quality for up to $4,000 in tax deductions. Buyers can opt to claim this credit when filing their taxes or they have the option to transfer the credit to an eligible car dealer and choose an immediate discount on the purchase of the vehicle in lieu of a future tax deduction. There are income limits for taking advantage of this tax deduction. To qualify for a new EV tax deduction, single filters must have an income below $150,000 and below $300,000 for those filing jointly. The used EV tax deduction is only available for single filers with an income below $75,000 and $150,000 for married couples filing jointly.

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Common Tax Penalties and How to Avoid Them

Litchfield, NH Resident Looks for Advice

One of the most common penalties that taxpayers incur from the IRS is the failure-to-file penalty. If taxes, or an extension, are not filed by the tax deadline and there is money owed a penalty totaling 5% of the taxes owed from the return will accrue each month. This dollar amount is capped at 25% of the owed taxes and there is a minimum penalty for tax money paid within 60-days. Failure-to-pay is another common tax penalty that occurs if taxes are filed but owed money is not paid, or an extension filed, by the tax deadline. This penalty is 0.5% of the money owed, also capping at 25%. Regardless of being a day late or 30 days late, both the failure-to-file and failure-to-pay penalties will be charged for a full month minimum.

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Milford, NH Resident Starts to Panic

Most Americans have their tax refund deposited directly into a bank account. This saves time in receiving your money and eliminates the potential of the refund getting lost or further delayed in the mail. But what if you erroneously provide the banking information for your refund to be deposited, or the account number has changed? If the IRS tries to deposit your tax refund into a bank account that does not exist or cannot be validated, a paper refund check will automatically be issued and mailed. This process can delay the refund significantly, oftentimes as much as ten weeks from the date of the attempted deposit.

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Amherst, NH Resident Begins to Worry

In many situations filing for a tax extension is a very smart move, particularly with the April tax deadline looming. It is important that your tax return be complete and error-free. Tax filers that need more time to prepare the documents and gather their numbers may find it advantageous to file an extension rather than scrambling at the last minute to piece everything together, putting themselves at risk for making an error. This is particularly true if you want to seek the advice of a tax professional. Giving yourself, and your tax preparer more time, can make sure your paperwork is filed properly.

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Hudson, NH Resident Find a Big Mistake

You should not take for granted that all of the paperwork that you receive for your taxes is correct. This includes a W2 issued by the employer and Form 1099s for those that are self-employed or gig workers. Mistakes made on these forms can happen due to human error. If this isn’t caught, and corrected, prior to filing your taxes you may be hit with an IRS audit. If you receive an incorrect tax form, you will need to contact the issuer of the form regarding the mistake. You can request a corrected form be sent to you, making sure the “corrected” box is checked so that the IRS knows that this is an amended form. Waiting too long or failing to request this correct documentation can put you at risk in the future.

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What is a Tax-Advantaged Account?

Brookline, NH Resident Looks to Understand This Frequently Used Term

A tax-advantaged account refers to any type of investment or savings account that is either exempt from taxes, tax-deferred, or offers some other type of tax savings unique to the type of account. The way these accounts work vary significantly, but all will offer some type of tax advantage. Some of the most common include retirement plans, education plans such as a 529, and health plans like a Health Savings Account (HSA).

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What is Tax Loss Harvesting?

Amherst, NH Resident Looks for Ways to Reduce Capital Gains Tax

Tax loss harvesting is an effective strategy for investing that you can use all year long in an effort to reduce the amount of capital gains taxes owed on your earnings. This practice is offsetting capital gains with capital losses and can make a big difference in the amount of taxes owed each quarter from the sale of your investments. Not all investments are going to perform as well as you like. When you sell one for a profit, while also selling an under-performing investment at a loss, this will help to balance the taxes you owe in capital gains.

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What are the Tax Benefits for Married Couples?

Newlyweds in Amherst, NH Have Questions

There can be some significant tax savings for married couples. While this is by no means the reason you should tie the knot, it is nice to start enjoying some of the tax benefits that can go hand in hand with marriage. Depending on the income from both spouses, getting married can put the higher earning spouse into a lower tax bracket. When filing your taxes jointly, this can offer significant tax savings over single individuals with the same level of income. The standard deduction is also higher for married couples, versus filing as a single individual. Having this deduction shared jointly can make a difference in the amount of taxes you pay by lowering your total income.

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What are the Tax Advantages of a Roth IRA Account?

Hudson, NH Resident Seeks Advice

A Roth IRA is a favorite retirement account for many reasons, particularly for the tax advantages that it offers as your money grows and when it is withdrawn. With a Roth IRA, your contributions to the account are after-tax money. This means you are paying taxes on this income up-front. However, as the money then grows in the Roth IRA these earnings are tax-free. You can begin making withdrawals when you reach 59 ½ years of age. These withdrawals are also tax-free. This means that the interest earned from your Roth IRA is not taxed, giving you maximum income in retirement when you may need it most.

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Goffstown, NH Resident Has Concerns

As long as your child doesn’t earn more than the standard deduction, $14,600 for the 2024 tax year, they will not be required to file a separate tax return. If your teen earns under $1,150, this is tax-free income. Anything above this will be subjected to taxes. Income earned by your child that is over $2,300 will be subject to the parent’s tax rate. This could mean that a larger amount is taken for taxes. As long as your working teenager is still a minor, relies on you for more than half of their financial support, and lives with you for at least half of the year, you can continue to claim them on your taxes for a dependent deduction.

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