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Author: Paul Belfiore

How are Lottery Winnings Taxed?

Lucky Nashua, NH Resident Seeks Advice

Lottery, and other winnings throughout the year, that are $600 or more are taxed by the IRS.  If the money is received as a lump sum, you will pay the full tax amount.  If it is drawn out over several years, you will be taxed by what you receive for each calendar year.  The federal tax on winnings is 24% when and the local government will also take their own portion for taxes.  You can expect to pay between 30-35% of taxes on your winnings.

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Brookline, NH Resident Has Questions

Earned income refers to all of the ways that you get paid throughout the year.  This includes your paycheck, commissions, bonuses and income less expenses for self-employed individuals.  It also includes money earned from investments, interest, dividends, alimony and Social Security.  Adjusted gross income refers to this money less any standard deductions that are available to you.  These deductions, referred to as ‘above the line deductions’, are those that are standard to everyone regardless of whether they are itemizing.

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Are Child Care Expenses Tax-Deductible?

If your annual income is $15,000 or higher, you can take advantage of the childcare expenses tax credit.  This tax break allows you to deduct up to $3,000 in childcare expenses.  This can include daycare, babysitter fees and even summer camp.  For two or more dependents this deduction totals $6,000.

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Hollis, NH Resident Seeks Advice

There are many tax benefits to a 529 plan to save for a child’s college.  Money in this account can now be used to pay for private elementary and high school education expenses as well.  This plan can save parents plenty as the money invested and withdrawals are tax-free when used for qualified education expenses.  Up to $10,000 can be withdrawn from the 529 annually to pay for private elementary or secondary school.

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What Changes are in the New W-4 Form for 2020?

Amherst, NH Taxpayer Has Questions

The biggest change to the new W-4 Form, debuting in 2020, is that there are no longer withholding allowances.  Previously, more allowances claimed would mean that less of your paycheck would be taken for taxes.  Instead, questions such as filing status, family income, dependents and the tax deductions that you plan to claim will be asked to determine your withholdings. 

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How to Track Mileage Easily for Tax Deductions

Nashua Resident Seeks Suggestions

The mileage that you drive each year for business purposes can really add up, making this a significant deduction on your taxes.  Whether a company vehicle, or your own car for business purposes, the 2019 deduction is 58 cents per mile.  It is important to keep excellent track of this mileage as a record in the event of an IRS audit.

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How the Gift Tax Works

Amherst Resident Seeks Advice

Giving more than $15,000 in cash or assets to one person may mean that you have to a file a gift tax return at the end of the year.  What qualifies as a gift by the IRS may surprise you, including paying for a child’s wedding, adding cash to an elderly family member’s bank account and even gifting a car.  While all of these may not require you to pay a gift tax, you will need to file IRS Form 709 to fully disclose the information.

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