One of the best ways to make sure you get your tax refund as quickly as possible is to file your return electronically. This eliminates the time during transit, getting your tax return at the front of the line. There is a significant backlog for paper returns and yours is unlikely to be prioritized. You should also request a direct deposit for your refund, instead of waiting for a check to be mailed.
Only businesses classified as corporations can deduct charitable donations on their business tax return. These contributions to charity cannot be more than 60% of the adjusted gross income. Business owners for other types, including sole proprietorships and partnerships, can deduct charitable contributions on their own personal tax return.
Profit from the sale of a home will fall under capital gains and be taxed accordingly. If your property has increased in value significantly since the time of purchase, you may be hit with a large and unexpected tax burden. The difference of what was paid for the home initially and the selling price, less closing costs, real estate commissions, and other fees is considered capital gains. If you have lived in the residence for at least two of the past five years you can exempt $250,000 and $500,000 for married couples filing jointly. Any profit exceeding this amount can be subjected to the capital gains tax.
As a small business owner there are some important tax credits that can save you money, including the Work Opportunity Tax Credit. This credit, worth up to $9,600 per employee, is for veterans, long-term unemployed individuals who have been actively looking for work for 27 weeks or longer, and those receiving assistance from TANF (Temporary Assistance for Needy Families) or SNAP (Supplemental Nutrition Assistance Program). Those small businesses that offer health care to employees may be eligible for the Small Business Health Care Credit, which can cover up to 50% of healthcare premiums paid by the company for employees’ healthcare.
In 2018 the Tax Cuts and Jobs Act eliminated the ability for businesses to deduct entertainment and recreation expenses. However, the Business Meal Tax Deduction was not eliminated with this change. To qualify for this deduction the meal expense may not be lavish or extravagant, as subjectively determined. The taxpayer or an employee of the taxpayer must be present at the meal and the food and drink must be provided to a business associate.
Self-employed individuals can claim office supplies on their taxes. This includes printer ink, paper, pens and pencils and other everyday supplies that are used for business purposes. Individuals that work for an employer are not eligible for this type of deductions. Instead, you should be able to seek reimbursement from your employer for out-of-pocket expenditures for office supplies.
The American Opportunity Tax Credit (AOTC) allows a maximum $2,500 per child per year for those paying for an undergraduate tuition. This credit can only be used for qualifying expenses that are not being paid with a 529 distribution. The Lifetime Learning Credit offers a maximum credit of up to $2,000. The Lifetime Learning Credit is not restricted to undergraduate study and can be used in graduate programs as well.
Child tax credit payments began over the summer and will continue through the year for qualifying families. When you go to file your 2021 taxes, you will only be eligible for half of the normal child care credit because the other half was already received throughout the second half of 2021. Since the deduction is based off of your 2020 income, a significant increase in your income may leave you owing some of the money back to the IRS if it exceeds the thresholds set.
A 529 is a great way to save for education expenses. Withdrawals are tax-free when used on qualified education expenses. However, if the money is withdrawn for non-qualified expenses or if there is money left over to be withdrawn after all expenses are paid this is considered taxable income. In addition to paying taxes on the leftover amount, you will also incur a 10% penalty for these withdrawals.
Currently taxpayers can claim a tax credit of $2,000 per child under age seventeen. The American Rescue Plan raises that amount to $3,600 for children under age six and $3,000 for those between six and seventeen. This change means additional tax credit per child, and it allows those that are seventeen to now qualify as well. While the majority of families with minor children will qualify for this additional tax credit, there are income limits that will restrict others.