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 Up to $10,000 can be withdrawn from the 529 annually to pay for private elementary or secondary school.
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.
For small business owners and other self-employed individuals or contractors, there are many tax deductions available. These include things such as a home office, internet, phone, office supplies used and even business travel expenses. By itemizing these items on your tax return, you can see a substantial savings.
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.
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.
When an individual or business has failed to pay taxes that are owed, the federal or state government can place a lien on their property and other assets. This lien can be removed if the parties are able to come to a payment agreement to settle the back taxes. If no agreement is made and there is no repayment, the property can be seized with the option to sell it at auction to pay the back taxes.
One of the easiest ways to keep your tax bill down in retirement is with a Roth IRA. With this account, contribution withdrawals and money earned are tax-free. A health savings account or HSA is a good way of setting aside money for medical expenses, tax-free.
The money paid toward your mortgage interest reduces your adjusted gross income. This brings down your taxable income, in some circumstances even putting you in a lower tax bracket. To take advantage of this potential savings, you must deduct your mortgage interest from your annual tax bill.
The Child Tax Credit (CTC) is worth up to $2,000 per child or other dependent that is younger than seventeen years old. To qualify, you must earn an annual income of at least $2,500. For single filers, this credit begins to phase out at $200,000 annual revenue and $400,000 for couples filing jointly.
Full-time college students may be eligible for several tax credits that can offset the burden of paying for their education. One of the largest is the American Opportunity Tax Credit (AOTC). This credit is available for the first four years of post-graduate school and allows up to $2,500 per eligible student.