Unmarried individuals have the option of either single or head of household as their tax status. When filing as head of household, you have a much higher standard deduction than single filers, as well as a better overall tax rate. To qualify as head of household you must be unmarried, pay greater than half the costs of supporting a household and have at least one dependent that lives with you.
Homes that are used solely for personal use cannot have the cost of home improvement projects deducted. However, if down the road you sell your home for a profit the money paid for home deductions can be deducted from this profit. This ends up being less of a profit that will be taxed when the home is sold. If part of the home is used for business and this area is affected by the renovations, you can deduct 100% of this cost.
While employers and institutions have a deadline for sending out tax paperwork, there are plenty of reasons it may fail to get into your hands. Whether lost in the mail, misplaced or some other event, the best step is to contact the issuer of the document. They may be able to send a duplicate copy right away. If you are still not having any luck getting the missing document, you can call the IRS. Providing information to the IRS about the document in question will make sure that you are covered when you go to file your taxes.
Businesses who took advantage of the Payroll Protection Program (PPP) can breathe a sigh of relief. Legislators have decided money from the PPP will allow for the deduction of expenses. This means that businesses will not lose any tax deductions that were expected because money was paid using the PPP loans. This is big news for businesses and a huge relief of a potentially hefty tax burden.
If you sell a home for a profit over what you paid for it, you will not have to pay taxes on this profit unless the gains exceed the threshold set by the IRS. For single filers, this is $125,000 and $250,000 for married taxpayers. Beyond this dollar amount, the remaining profit may be taxed as capital gains.
Short-term capital gains come from selling capital assets that have been owned for less than one year. The tax rate for this money is equal to your ordinary tax rate. Long-term capital gains are typically taxed lower than short-term. In 2020 this tax rate was either 0%, 15% or 20%, depending on your annual income. Selling stock, land or a business that has been in your possession for less than a year will significantly increase the amount of taxes you pay on these gains.
A 501(c)(3) organization is one that is recognized by the federal law as a non-profit. These organizations are recognized by the IRS as being tax-exempt with primary activities being of a charitable nature. To be able to deduct charitable contributions on your taxes, organizations much fall under section 501(c)(3). This is also a good way to affirm whether the organization is indeed a charity.
Itemized deductions are a range of expenses that are deductible on your taxes. These include mortgage interest, property taxes, medical and dental expenses that exceed 7.5% of your adjusted gross income, charitable donations and more. Itemized deductions reduce your taxable income significantly, resulting in less taxes paid and, in some cases, even a lower tax bracket.
Not filing your taxes on time could result in a failure-to-file penalty. This penalty is 5% of the unpaid taxes for each month that the tax return is late, up to five months. Continuing to ignore your taxes could result in the IRS taking action in the form of a federal tax lien on your property, seizing your property and even filing charges for tax evasion.
It isn’t uncommon today, in this gig economy, for people to have side work beyond their full-time employment. It is important to report, and pay taxes on, this additional income. If your freelancing clients are paying you in excess of $600 per year each, should be sending out a Form 1099-MISC at the end of the calendar year as a record of this money paid. When you file your taxes, all of this additional income made from freelancing should be reported to the IRS.