Category: Tax Deductions and Credits

Deductions and credits may be similar but they are far from identical when it comes to your tax return. A tax deduction is a qualifying expense that decreases your taxable income. On the other hand, tax credits allow taxpayers to reduce their tax due to the IRS, dollar-for-dollar. You subtract the amount that the credit is worth from your tax liabilities. If you had to compare the two, a tax credit is more valuable on your tax return. Want to learn more about different credits you are eligible for or tax expenses you can claim? PriorTax tells you about expenses you can claim.

Archive for the ‘Tax Deductions and Credits’ Category

Dependents and Child Tax Credit and Benefits in 2025

Posted by admin on June 13, 2024
Last modified: June 12, 2024

Despite the recent tax reform removing the dependency exemption, opportunities remain to maximize your tax refund by leveraging tax benefits related to dependents. Such tax benefits and child tax credit in 2025 have the potential to lessen or completely eliminate your tax obligations greatly.

Certain types of tax credits mentioned are classified as refundable, indicating that you are eligible to receive a refund regardless of whether you have any tax liability to offset.

Exploring the tax advantages associated with having dependents is a complex but crucial task. At tax time, rest assured that the adept team at PriorTax will guide you through the process. our PriorTax dedicated tax professionals will inquire about your situation and identify the tax benefits you qualify for based on your responses.

Child Tax Credit in 2025

If you meet the criteria, you could qualify for the Child Tax Credit, a beneficial tax credit for your dependent children. Unlike a tax deduction, this credit directly lowers your tax bill by the exact amount.

In the tax year 2024, when you submit your 2025 tax return, families may be eligible for a Child Tax Credit of up to $2,000 per child aged below 17.

In order to qualify for the entire tax credit, tax paying individuals must have a modified adjusted gross income of $400,000 or less if they file jointly as a married couple, and $200,000 or less for other filing statuses.

Child Tax Credit in 2025

Child and Dependent Care Credit in 2025

If you are responsible for childcare expenses, there is a tax credit opportunity you could be eligible for during tax season. If you are employed or in the process of seeking employment, and you incur childcare costs for your dependent under 13 years old (with no age limit if they are disabled), you are eligible to claim the Child and Dependent Care tax Credit.

Explorable options for tax credits on childcare include expenses from nursery school, private kindergarten, after-school programs, daycare, and seasonal day camps like summer and winter programs. This specific credit offers a direct reduction in your tax liability corresponding to the amount spent on childcare, and it is classified as a nonrefundable credit.

In the fiscal year 2024, individuals can claim expenses of up to $3,000 for one qualifying tax filing person and $6,000 for two or more qualifying individuals. The credit amount is determined by a percentage of expenses, with a maximum credit of $1,050 for one individual or $2,100 for multiple individuals. However, this credit is scaled down for individuals earning over $15,000.

Other Dependent Credit in 2025

If you are not eligible for the Child Tax Credit and have a dependent child over 17 or are providing for a friend or family member, you can potentially claim the Other Dependent Credit, which offers up to $500 per qualifying individual.

Commencing a gradual decline once your adjusted gross income surpasses $200,000 (or $400,000 for those filing jointly), the tax credit becomes inactive for tax year 2024, showing nonrefundable characteristics.

Earned Income Tax Credit (EITC) in 2025

If your income falls below a specific tax threshold, you may be eligible for a unique tax credit. This credit is determined by factors such as your income level, tax filing status, and the number of qualifying dependents you have.

In tax year 2024, individuals may be eligible for a refundable tax credit can be based on the number of children they have. The amount of this tax credit can vary, ranging from a maximum of $7,830 for those with three or more children to $632 for those without children. A distinguishing feature of the Earned Income Tax Credit is that it is refundable, meaning that if the tax credit exceeds the total amount of taxes owed, the excess about can be refunded to the taxpayer.

In the past year, whatever financial decisions you’ve made, the committed tax experts at PriorTax are here to ensure they significantly impact your tax returns. Whether you prefer handling your taxes independently or entrusting them to a PriorTax specialist, rest assured that we are tax dedicated to maximizing your tax refund and securing every dollar you are entitled to.

4 Key Changes for the New Employee Withholding 2024 IRS Tax Form W-4

Posted by admin on June 6, 2024
Last modified: June 6, 2024

Exploring the newest developments in the 2024 Tax Form W-4 is crucial for staying informed. This detailed article delves into the ins and outs of the updated Tax Form W-4, shedding light on its purpose, revisions introduced in the latest version, its application, and a step-by-step guide on completing each section. Additionally, essential guidelines governing this important form will be examined, along with recommended strategies for effectively incorporating it into your professional environment.

What is a W-4 Form?

The Employee’s Withholding Allowance Certificate, identified as Form W-4 or Employee’s Withholding Certificate, is a crucial document that determines the amount of federal tax to be withheld from an employee’s salary.

The computation takes into account the employee’s information, including their filing status and family size. Because these details can change, the amount withheld may differ each year. Employees should review and update their forms every year to ensure accuracy.

The W-2 form is an essential complement to the W-4 when it comes to documenting income and taxes.

In response to recent tax law updates such as tax rate adjustments and tax deductions, the IRS introduced the updated Form W-4 Employee’s Withholding Certificate. This revised form aims to assist taxpayers in accurately determining their withholding amount by incorporating changes like the enhanced Child Tax Credit, including the new Other Dependent Credit, and removing dependent and personal exemptions.

In an effort to streamline the tax withholding process, the IRS has announced that not all workers will be mandated to fill out the updated 2024 Tax Form W-4. Remarkably, the agency has coordinated the federal withholding tables to accommodate the latest version of the form and the withholding computations from previous years. Only new hires and employees seeking to adjust their withholding must complete the form.

Rest assured that you don’t need to stress over deciphering the specifics of the modifications to the Form W-4 and determining your 2024 W-4 withholding calculations. Leave it to PriorTax dedicated tax professional to guide you through. Utilize PriorTax’s complimentary Updated W-4 Withholding Calculator to project your withholding amount effortlessly.

Tax Form W-4

Looking to maximize your tax refund, reduce your tax bill, or increase your take-home pay?

The free W-4 withholding calculator from PriorTax is here to assist you. Easily estimate your withholding and complete Form W-4 for your employer with confidence.

In the year 2024, you can now input details about your dependents, earnings, and important tax deductions and credits into the system. With this information, the tool will assist you in modifying your withholding amount, providing insights into how it impacts both your tax refund and the amount you receive in each paycheck.

Exploring the latest updates in the IRS 2020 Form W-4, it is essential to grasp the significant changes that impact your withholding. PriorTax’s updated W-4 Withholding Calculator streamlines the process of estimating your withholding accurately.

Personal Withholding Allowances

In the latest version of the W-4 form, a significant alteration involves the removal of personal withholding allowances. Rather than relying on this system, the updated form now adopts a 5-step approach and incorporates fresh Federal Income Tax Withholding Methods for calculating accurate withholdings. Previously, the concept of withholding allowances was closely linked to personal and dependent exemptions, which were subsequently removed as part of the tax reform.

Focus on Tax Credits including Dependents Tax Credits

In the third step of the document, you can confirm your eligibility for the Child Tax Credit and the Other Dependent Credit. Moreover, you can specify any other credits, such as education tax credits, to adjust your withholding amount precisely.

Exemption Section is Removed

In the absence of a designated section for claiming withholding exemptions, you can indicate that you are exempt by writing “Exempt” in the space provided below 4C. 

When you fill out and deliver Form W-4 to your employer, it helps them determine the appropriate amount of tax to withhold from your earnings. It is common practice to update your W-4 when there are changes in your personal or financial circumstances.

Options for Making Adjustments

Step 4 of the form is an optional section where you can:

  • Consider modifying your withholding if you receive supplementary income such as interest, dividends, or retirement earnings.
  • If you find yourself eligible for deductions beyond the standard deduction, such as itemized deductions and extra tax breaks like student loan interest, consider decreasing the amount withheld from this portion.
  • If you wish to designate a specific amount of extra income tax to be tax deducted from your paycheck, please indicate the additional withholding here. This includes any necessary adjustments if you or your spouse are employed in multiple positions simultaneously.

In the event that your circumstances remain unchanged, you may find that there is no necessity to submit the updated IRS Form W-4. The IRS has taken steps to ensure that the federal withholding tables are compatible with the latest iteration of the form and withholding calculations from previous years.

In case you have been affected by recent tax regulations, experienced alterations in your financial circumstances, commenced a different position, or found discrepancies in your 2025 tax filing results, it would be advisable to complete the updated W-4 form.

What are the repercussions of incorrect filing?

Mistakes in calculating your W-4 form may lead to tax discrepancies that could catch you off guard. Underestimating federal tax withholdings can result in unexpected bills when it’s time to file your taxes. These errors have serious financial consequences and can lead to hefty penalties. Engaging in the following two activities could result in fines or incarceration.

Underreporting Estimates

When it comes to underreporting estimates, employees must accurately calculate their federal tax withholdings to avoid potential penalties. If employees underestimates their withholdings during tax filing, they may be subject to a $500 fine.

Entering False Data

Employees who deliberately provide incorrect information or omit details that could impact their withholdings may be subject to legal consequences. Conviction for such actions could result in a fine of $1,000 or a maximum of one year behind bars for the employee. Employers, however, are solely responsible for calculating withholdings based on the information furnished by the employee and are not obligated to validate the accuracy of the data.

Feeling uncertain about calculating your withholding amount? No need to stress – PriorTax offers a free W-4 withholding Calculator that can help you quickly determine your withholding and complete Form W-4.

In tax preparation, let PriorTax be your trusted ally to ensure that every financial decision you made in the past year is maximized for your tax benefit.

Pay nothing out of pocket now with a Tax Refund Transfer.

Posted by admin on May 30, 2024
Last modified: June 6, 2024

Protect your wallet by utilizing Refund Transfer which enable you to cover tax preparation fees and other expenses using your tax refund. Afterward, you have the flexibility to designate the destination for the remaining balance.

One of the services offered by Prior Tax involves collaborating with reputable banks in the United States to offer a product known as Refund Transfer. This product is designed to facilitate the process of receiving tax refunds through a bank deposit rather than as a loan.

When you provide approval for transactions from the linked account of your Refund Transfer, it will impact the final amount you receive as your refund. Charges may be incurred. A qualifying anticipated tax refund and electronic filing are necessary for this process.

Customers can conveniently cover their tax preparation fees and other costs using a Refund Transfer (RT). The Refund Transfer Fee is levied when the initial funding is received, regardless of whether it comes from a federal or state refund. Furthermore, a Subsequent Funding Fee is applied for each extra funding received, regardless of whether its source is a federal or state refund.

refund transfer

Pay for Your Tax Preparation Fees with Refund Transfer.

Our convenient Refund Transfer method offers a hassle-free payment option for online tax preparation. With no upfront expenses, you can easily cover the costs of your tax preparation. The processing fee for Refund Transfer will only be charged upon completion of your filing.

Why Would I Choose a Tax Refund Transfer?

Refund Transfer for Convenience

Providing a seamless experience is essential. You can find a dedicated tax professional for tax preparation services all without incurring any initial costs.

Refund Transfer for Speed

Efficiency is key when it comes to Refund Transfers. This service enables customers with bank accounts to enjoy the convenience of having their refunds securely processed through direct deposit, eliminating the need to wait for a paper check to be issued and mailed by the IRS. Additionally, bank checks can be printed in your office for immediate pick-up on the same day.

For individuals who do not have bank accounts, various choices are available for securely accessing funds.

Refund Transfer for Security

When it comes to financial safeguards, a considerable number of taxpayers, including individuals with existing bank accounts, opt to retrieve a bank-issued check from the secure environment of their tax office instead of having an IRS-issued check delivered by mail or through direct deposit.

How Refund Transfer works

To start the tax refund process, you have the option to submit your application either in person or online. Collaborate with a tax professional or utilize online tools for assistance with your application. Afterward, establish an FDIC-insured Refund Account to receive your tax refund payment securely. When all services are finished, fees will be deducted directly from your refund, including those for tax preparation and Refund Transfer. Remember, fees are only charged upon completion of services.

Make the most of your funds. Treat yourself to something special. Or set aside some savings for unexpected expenses. Spend your refund in any way that suits you best.

Tax Tips for Graduates from Class of 2024

Posted by admin on May 23, 2024
Last modified: May 31, 2024

A hearty congratulations to the esteemed graduates of the Class of 2024. Commemorating your graduation is vital, but it is equally important to prepare yourselves, both mentally and financially, for the impending transition into the unforgiving real world with our tax tips for graduates.

Transitioning into the next chapter of life can be both exciting and daunting. For recent graduates embarking on this journey, it is crucial to equip yourself with essential knowledge on managing your finances and taxes as you step into the real world.

Tax Tips for Graduates 1. Take Control of your Financials

Once you venture into independent living and begin receiving a consistent income from full-time work, embracing accountability for your commitments becomes essential.

Ensuring compliance with tax regulations involves several key steps. These include completing the W-4 form correctly, grasping the details of your withholdings, submitting estimated tax payments when you are self-employed or engaged as a contractor, and maintaining precise documentation of expenses that qualify for tax deductions.

Embarking on the journey of entrepreneurship requires meticulous tracking of your financial transactions. Utilizing a spreadsheet to document your business expenses, income, deductible mileage, and quarterly estimated taxes can streamline the process of managing your finances effectively and efficiently throughout the year.

Quickly transfer all this data to your PriorTax Self-Employed tax filing by collaborating with a dedicated tax specialist from PriorTax. This streamlined process ensures that you won’t need to input your details twice when tax season arrives.

tax tips for graduates

Tax Tips for Graduates 2. Start My Tax Advantage Savings Accounts and Plans

To set yourself up for financial success, consider the benefits of opening and actively funding tax-advantaged retirement savings plans and accounts like a 401K or Roth IRA.

By utilizing these accounts, you can prepare for upcoming financial endeavors while also significantly reducing your tax burden, both presently and in the long run.

Tax Tips for Graduates 3. Apply My Education Tax Deductions and Benefits

Remember to make the most of the educational tax breaks that you are eligible for. Whether you’ve already incurred qualifying education costs recently or are currently facing expenses related to pursuing an advanced degree, be sure to take advantage of the available benefits.

Upon receiving a 1098-T form indicating tuition payments made within the year, ensure to either download the information provided or input it into your records. Retaining receipts for education-related costs such as tuition, fees, books, supplies, and equipment is advisable to maximize education tax benefits and deductions when filing taxes.

Tax Tips for Graduates 4. Remember My Student Loan Interest Tax Deduction

Upon completing your studies, it’s likely that you’ll need to commence making monthly payments towards your student loans. A significant portion of these payments will go towards interest accrued on the loans. Fortunately, you have the option to claim a tax deduction of up to $2,500 on the interest paid. Your loan provider will furnish you with a Form 1098-E detailing the annual interest amount you’ve paid.

Tax Tips for Graduates 5. Accurately File My Tax Return

It is advisable to submit a tax return, irrespective of meeting the IRS filing threshold if federal taxes were deducted from your earnings. This could lead to a potential tax refund.

It is crucial to take action, particularly if you qualify for a refundable tax credit such as the Earned Income Tax Credit. Annually, more than $1 billion in unclaimed tax refunds are reported by the IRS, with the average unclaimed tax refund amounting to around $900. Remember, submitting your tax return is the key to receiving a tax refund.

Rest assured that you don’t need to stress about familiarizing yourself with these tax advantages. PriorTax will ensure they are fully utilized in your tax filing regardless of the financial decisions you took in the previous year. Whether you prefer to navigate your tax return independently or opt for the expertise of a PriorTax dedicated tax professional, rest assured that we will maximize your tax benefits and secure the largest refund possible – with a guarantee.

Key Tax Benefits and Policies in 2025 That might be gone in 2026

Posted by admin on May 16, 2024
Last modified: May 20, 2024

Tax Benefits in 2025: In the absence of Congressional intervention, numerous tax adjustments are on the horizon for 2026, encompassing elevated tax rates and diminished standard deductions. In the near future year is poised for significant tax modifications, all stemming from the repercussions of the 2017 tax reform legislation, which rendered numerous individual tax provisions impermanent.

In the near future, significant tax revisions are on the horizon for 2026. The impetus behind these changes stems from the legislation passed in 2017 aimed at tax reform. The majority of individual tax measures established were intended to be only temporary, with a set expiration date set for the year 2025. Should Congress choose not to extend these provisions, they will automatically revert to the regulations enacted 2017 come January 1, 2026.

tax benefits in 2025

2025 Tax brackets: The individual income tax rates of 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent may go back to 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent, with different income-level break points and brackets than now.

Greater standard deductions: The 2017 law more than doubled these breaks.

Greater child tax credits: In the past, child tax credits were set at $1,000, but in 2018, the amount was increased to $2,000.

Alternative minimum tax: Since 2017, the increased exemption amounts and expanded phaseout zones for the alternative minimum tax have significantly reduced the number of individual taxpayers required to pay the AMT.

The tax benefit in 2025 known as the 20% qualified business income deduction is aimed at self-employed individuals and those who hold ownership stakes in S corporations, partnerships, limited liability companies, and other similar pass-through entities.

The adjusted gross income (AGI) limitation: In tax laws, a welcomed change was implemented under the 2017 tax legislation, raising the adjusted gross income (AGI) cap on cash contributions to eligible charities from 50% to 60%.

The more significant lifetime estate and gift tax exemption: In the current year, individuals are entitled to a significantly larger lifetime estate and gift tax exemption amounting to $13,610,000 for those who pass away.

The cutback on high itemizations for upper-income taxpayers would return.

Restrictions on Popular Tax Deductions Also End After 2025.

Among them

Personal exemptions:  In the tax year of 2017, individuals were able to claim a deduction of $4,050 for both themselves and any dependents they had. To illustrate, a household consisting of three individuals could benefit from a total deduction of $12,150 through personal exemptions. However, this provision was removed entirely with the implementation of the 2017 tax law.

The maximum of $10,000 cap on tax deducting local and state taxes on Schedule A of the 1040: Introducing a $10,000 ceiling on the deduction of state and local taxes listed on Schedule A of the 1040 form promises to provide much-needed respite to individuals burdened with substantial property and state income tax obligations.

The 2017 law implemented changes to the home mortgage interest deduction. The 2025 tax deduction limit for interest on home acquisition debt has been reduced from $1 million to $750,000.

Incorporated into Schedule A, various 2025 tax deductions are subject to the 2% of Adjusted Gross Income threshold. Until 2025, the category of itemized deductions has been removed by the 2017 law. Items no longer eligible for deduction include unreimbursed employee expenses such as travel, meals, and education costs, brokerage and IRA fees, hobby-related expenses, and tax return preparation fees.

Theft and casualty losses: 2025 Tax deductions for theft and casualty losses are limited to those incurred in areas designated as federal disaster zones, as specified by existing regulations for reporting on Schedule A.

Job-related moving expenses: Now, only members of the military get the break.

Two important tax breaks are set to expire in 2025, marking the end of certain benefits not included in the 2017 legislation. Specifically, the extension of the Obamacare health premium credit to a broader group of individuals purchasing insurance through a marketplace will cease. 

Additionally, the exemption from federal income tax for forgiven student loan debt accumulated between 2021 and 2025 will come to an end. This exception contrasts with the typical taxation of income resulting from debt cancellation.

Maximizing My Tax Benefits in 2025 with a Dedicated Tax Professional

Our dedicated Tax Professional will walk you through this complicated process from start to finish for accurate tax filing and maximum tax return in 2025.

Summer Tax Deduction from Child Care and Child Activities during Summer Break

Posted by admin on May 9, 2024
Last modified: May 14, 2024

As tax day fades into the past, now is the perfect time to plan out your summer getaway. But the challenge of arranging summer childcare while balancing work responsibilities can be particularly demanding for working parents. When caring for children during the summer months, costs can quickly add up. Intelligent tax deductions can help through flexible spending accounts and dependent care credits from summary time for Summer Tax Deduction.

Summer Tax Deduction

Dependent Care Flexible Spending Accounts for Summer Tax Deduction

Should you have a Dependent Care Flexible Spending Account (DCFSA) provided by your employer, you can allocate up to $5,000 per household from your earnings to cover dependent care expenses ($2,500 for individuals who are married and filing separately).

One major advantage of utilizing a Flexible Spending Account (FSA) is the tax benefits associated with your contributions. When you contribute to an FSA, your funds are not subject to income or payroll taxes like social security and Medicare taxes. These accounts are also known as Dependent Care Assistance Plans or Dependent Care Reimbursement Accounts.

Who Qualifies for Dependent Care FSA?

When providing care, the individual in need should either be your child or, if dependent, should be younger than 13 years old or incapacitated.

Throughout the course of the year, the dependent child must not have been responsible for more than half of their own financial support.

  • A taxpayer must be younger than the child in order to claim the child as a qualifying dependent.
  • In order for married couples to qualify, both partners must have a minimum income of $5,000, with exceptions for spouses who are disabled, full-time students, or actively seeking employment.
  • Make sure to spend the allocated funds before the year ends to avoid losing them.

One important requirement is that you enroll in the payroll tax deduction system offered by your employer at the start of the calendar year. This crucial step must be noticed.

What Expenses Qualify for Summer Tax Deduction?

Child Care Providers.

For parents utilizing their FSA to cover childcare expenses, it is essential that childcare providers furnish their taxpayer identification number, either their Employer ID number or Social Security number, to ensure reimbursement. This requirement necessitates that providers accurately report the income from childcare services on their tax returns.

Summer Camps.

When it comes to summer activities, day camps are eligible for reimbursement, while overnight camps are not covered. This distinction benefits parents who opt for a range of day camp experiences, like soccer, tennis, and computer camps. However, it’s important to note that tutoring and summer school programs are not considered eligible expenses for reimbursement during the summer months.

Payments to Grandma.

If you decide to enlist the help of family members like Grandma or other relatives to look after your children over the summer months, you may be able to receive compensation through your Dependent Care FSA program. It is important that the family member has a valid Social Security number and declares the income on their tax filings. While other relatives may also be eligible, this does not apply if they are considered your dependents. Therefore, you cannot compensate your 16-year-old to watch over the younger children and still claim them as a dependent on your taxes.

Child and Dependent Care Credit

In the event that you are not enrolled in a Dependent Care Assistance Program, you are eligible to seek still reimbursement for the child care expenses previously reviewed through the Child and Dependent Care credit. Individuals with an Adjusted Gross Income (AGI) of $15,000 or lower can potentially receive a federal tax credit of up to 35% of the expenses incurred, with a cap of $3,000 per child ($6,000 in total). The credit percentage decreases as AGI rises, eventually stabilizing at 20% for those with an AGI of $43,000 or higher.

Consider this scenario: Imagine you have two children and incur $1,000 in qualifying childcare costs for each child. As a result, you are eligible to receive a federal tax credit of $200 per child. This tax credit directly reduces the amount of taxes you owe.

Should I choose DCFSA or the Tax Credit?

Suppose you find yourself in a federal tax bracket of 22% and decide to contribute $5,000 to your DCFSA. This contribution can lead to savings of $1,100 on your federal income tax and potentially reduce your state taxes. 

Furthermore, by opting to contribute to a Dependent Care Flexible Spending Account (DCFSA), you can lower your Medicare tax by 1.45% and potentially reduce your Social Security tax by up to 6.2%, as these amounts would not be considered taxable wages on your W-2 Form.

Suppose you decide to utilize the child and dependent care credit, rather than opting for a dependent care assistance program, to account for your expenses. If the credit is set at 20%, the $10,000 spent on child care will result in a $2,000 reduction in federal income taxes.

Lower-income individuals may be eligible for the more generous 35% tax credit. However, those in this income bracket typically do not owe federal taxes, and the credit cannot be refunded.

To the majority of guardians, opting for the DCFSA income exclusion proves most advantageous. Regardless of your decision, seize the tax-saving advantages offered by child care and day camp costs during the upcoming summer months.

In the previous year, regardless of the financial decisions you undertook, Apex Tax Services is here to optimize your tax benefits. Whether you prefer taking charge of your tax filing or entrusting a skilled and dedicated Tax Professionals from PriorTax, we guarantee that you will receive the maximum refund you are entitled to.

Tax Deduct My Summer Moving Expenses?

Posted by admin on May 2, 2024
Last modified: May 1, 2024

As the warm months approach, many people choose to relocate, which often leads to additional financial burdens. The moving expenses associated with relocation, such as fuel, packing supplies, moving services, and insurance, can quickly accumulate and impact one’s budget.

When the time comes to relocate, it is expected to encounter additional expenses such as closing costs and security deposits that coincide with the move. Managing these financial obligations simultaneously can create a significant burden.

In the past, individuals could claim moving expenses as deductions on their taxes if they met certain criteria. However, due to the Tax Cuts and Jobs Act (TCJA), most taxpayers can no longer deduct moving costs on their federal tax returns. Despite this change, a provision allows specific military personnel and their families to still qualify for this deduction.

What Moving Expenses Should I Tax Deduct?

In the event that you are a member of the armed forces on active duty under military orders, you are eligible to claim deductions for the expenses incurred during your relocation. Specifically, you can deduct the costs associated with moving to your designated residence but not those related to any previous trips made in search of suitable housing.

When it comes to practical applications, it is possible to subtract the expenses related to packing and transporting your belongings. However, expenses for purchasing new decorations that may complement your new living space are not deductible. Additionally, you can claim the cost of storage for a maximum of 30 continuous days following the move, especially if your new residence is not fully prepared.

In conclusion, it is also possible to subtract any expenses related to accommodations for relocating from your former residence to your new place. However, it is important to note that you are unable to deduct the expenses for meals. It is crucial to remember that any reimbursements received for these costs cannot be deducted. Only the expenses that have not been reimbursed are eligible for deduction.

In the case of active-duty Armed Forces personnel who are eligible, expenses for air travel to relocate to a new residence can be deducted. Alternatively, for those who choose to drive, expenses such as fuel and oil can be tax deducted at a rate of 22 cents per mile in 2023 and 21 cents per mile in 2024.

Tax deduct your moving expenses associated, such as fuel, packing supplies, moving services, and insurance, etc.

Who Can Tax Deduct Moving Expenses?

Commencing from the year 2018, individuals eligible to claim deductions for their relocation costs on their federal tax returns are required to belong to the Armed Forces in active service and be relocating based on military directives for a permanent change in duty station.

From 2018 until 2025, the deduction for moving expenses was removed for various taxpayers under the existing tax legislation. However, once 2025 passes, the law will switch back to its previous form. Subsequently, all taxpayers will regain the eligibility to deduct specific expenses related to moving and journeying to a new residence.

How To Tax Deduct My Moving Expenses?

Upon meeting the eligibility criteria for deducting relocation costs, the process involves claiming this deduction through Form 3903. Form 3903 is a crucial document that must be submitted along with your federal tax return. The aggregate sum calculated through Form 3903 will be carried over to line 14 of Schedule 1, designated for moving expense deductions. Subsequently, this figure carries forward to Form 1040, contributing to the reduction of your adjusted gross income.

Does Moving Expense Tax Deduction Apply to State Tax Returns?

In certain regions such as California, there remains a provision for a deduction in your state tax filing. Even if you are ineligible for a federal deduction, you can input your relocation costs in PriorTax. Should your state permit this deduction, a dedicated Tax Professional from PriorTax will assist you in including the permissible amounts in your state tax return.

You May Soon Benefit from $8.8 billion in Inflation Reduction Act Home Energy Rebates

Posted by admin on April 25, 2024
Last modified: April 29, 2024

Recently, the Department of Energy approved the first state application for federal funding through the Home Energy Rebates program. A substantial $8.8 billion in funding under the Inflation Reduction Act has been designated to help consumers enhance the energy efficiency of their homes.

Consumers have easy access to financial assistance, with potential benefits reaching up to $14,000 per household or even more, depending on the state’s program structure.

home energy rebates

More Details About the Home Energy Rebates

Thanks to the Inflation Reduction Act, consumers may begin receiving rebates linked to household energy efficiency in just a matter of months. Federal authorities are disseminating $8.8 billion in funds for Home Energy Rebate programs to states, territories, and tribes, who are required to submit requests for financial support. Notably, the U.S.

Anticipation is building within the DOE for the upcoming launch of New York’s consumer program, which Karen Zelmar, the Home Energy Rebates program manager, believes will be open by the start of summer. New York ranks fourth in total funding allocation for the program, followed by California, Texas, and Florida.

Incentives offered by the government, with a potential value of $14,000 or higher per household, vary depending on the state’s specific program. These benefits serve as rebates for individuals who choose to enhance the efficiency of their homes or rental properties through specified upgrades.

These rebates have been introduced to support efficiency projects such as the installation of electric heat pumps, insulation, electrical panels, and Energy Star-rated appliances. The amount and qualification criteria are determined by various factors, including household income, resulting in higher rebates for those with lower to middle incomes.

How to Access the Home Energy Rebates

It is important to note that consumers are typically unable to double-dip on benefits. For instance, experts say a consumer who receives a rebate for purchasing an electric heat pump would generally not be able to factor in the energy savings from the same heat pump when determining eligibility for a broader household rebate.

According to experts, consumers can combine rebates with state and local utility programs. Those looking to upgrade before home energy rebate program implementation could explore alternative funding options under the Inflation Reduction Act, including tax incentives for enhancing home efficiency.

In order to receive rebates, they must be provided to customers directly when making a purchase. This could occur at the retailer, where customers may receive an immediate discount on the price or through a contractor who offers a rebate on the project cost at the time of sale, according to insights shared by Zelmar.

As industry experts have pointed out, the specific procedures for rebates can differ depending on the state. For additional support, find your free dedicated PriorTax Tax Professional.

RRC Recovery Rebate Tax Credit for a Limited Time Only

Posted by admin on April 25, 2024
Last modified: April 29, 2024

May 17th, 2024, is the last day to claim your 2020 Recovery Rebate Tax Credit you might have missed out on from 3 rounds of full COVID-19 Stimulus Payments. If individuals are seeking the Recovery Rebate Credit for the tax years 2020 or 2021 when completing their Form 1040, Individual Income Tax Return. It is important to note that the IRS is empowered to deduct their refund to settle specific federal and state debts. 

How to Recover a Missing Stimulus Payment by Utilizing the Recovery Rebate Credit. 

The government distributed a total of $931 billion in stimulus checks during the years 2020 and 2021 to support individuals during the height of the COVID-19 outbreak. Despite this significant effort, some individuals have yet to receive their allotted funds even after a considerable period has passed since the disbursement of the last stimulus payments.

For those individuals awaiting stimulus funds, payment may be received by filing for a “recovery rebate” tax credit when submitting their federal tax returns for 2020 or 2021.

To determine your eligibility for the 2020 or 2021 recovery rebate credit, it is essential to verify whether the IRS provided you with a stimulus or partial payment. If you have concerns about missing out on entitled funds, contacting the IRS or finding your dedicated PriorTax Tax Professional is the best course of action. Throughout 2020 and 2021, three sets of pandemic stimulus checks were distributed.

Recovery Rebate Tax Credit

Exploring Eligibility for Recovery Rebate Credit and Stimulus Payments.

If you missed out on a stimulus check or only received a partial payment, there is a chance for additional cash through the recovery rebate tax credit. From filing a federal tax return and claiming the tax credit, you may be eligible for this extra financial support. The income requirements align with those set for the stimulus payments, ensuring fairness and consistency in the process.

If you find that the IRS has issued a stimulus check but has gone missing, it is important not to apply for the recovery rebate credit. Instead, reach out to the tax agency and request them to track the payment.

Are You Not Eligible for the 2020 or 2021 Recovery Rebate Credit?

If you have already received the complete stimulus payments, you won’t be able to receive any additional cash. Furthermore, if you can be a dependent by someone else, you are not eligible to claim the tax credit. Moreover, only U.S. citizens or individuals classified as “resident aliens” are eligible for the recovery rebate credit.

Certain credits may be ineligible if you do not possess a Social Security number. However, in cases where one is married and their spouse holds an SSN, some exceptions could potentially make one eligible for the credit even if they are not registered in the Social Security system.

1st Round and 2nd Round of Stimulus

In the initial two installments, the stimulus payments depended on the tax details from either 2018 or 2019. People were eligible for the full stimulus amount if their adjusted gross income (AGI) – defined as income minus specific deductions – did not exceed $75,000 ($150,000 for couples filing jointly). Any income surpassing these thresholds gradually reduced the stimulus payments by $5 for every $100 earned above the limits.

In the initial round of stimulus disbursements, single individuals received $1,200, while married couples were granted $2,400, along with an additional $500 for each qualified dependent. Subsequently, the second wave of stimulus payments distributed $600 to singles, $1,200 to couples, and $600 per dependent.

If your annual income exceeded $99,000 ($198,000 for those married), the initial stimulus payment did not extend to you. As for the subsequent stimulus payment, once your AGI hit $87,000 for singles and $174,000 for couples, your eligible amount dwindled to $0.

3rd Round of Stimulus

The IRS considered tax information from either the 2019 or 2020 filing year to determine eligibility for the third round of stimulus checks. Those with an adjusted gross income (AGI) of $75,000 or less ($150,000 for married couples) were entitled to the full payment amount. Single individuals received $1,400, while married couples were eligible for $2,800, with an extra $1,400 allocated for each dependent.

In the event that you exceed the threshold income yet fall short of $80,000 ($160,000 for couples), a partial third stimulus payment is dispensed.

Stimulus Payment Checks are Not Subject for Tax

It is important to realize that stimulus payments are not subject to taxes. The IRS has released information specifying that the funds do not need to be reported as part of your total income or be taxed. Nevertheless, many individuals still lack a complete understanding of the impact of stimulus payments on their tax situation.

Providing financial aid in advance of tax filings, the stimulus payments functioned as prepayments on tax credits. As a refundable credit, the recovery rebate credit can lower your tax liability or result in a refund being issued to you.

It is crucial to note one last key detail: In usual circumstances, any extra funds received from the IRS must be returned if you were overpaid. However, the recovery rebate credit operates under a unique system. Suppose you initially received a stimulus payment according to your past tax details but now do not meet the eligibility criteria based on your present tax filing. In that case, you will not be required to reimburse any stimulus funds.

2024 Crypto Tax

Posted by admin on April 4, 2024
Last modified: April 4, 2024

The specific 2024 crypto tax rate you pay on cryptocurrency transactions is influenced by how long you hold the asset and your total income. Suppose you are a taxpayer in the United States. In that case, short-term capital gains arising from cryptocurrency held for less than a year are taxed at regular income tax rates varying from 10% to 37%, depending on the total income level you’ve earned and tax bracket you are subject to. Conversely, long-term capital gains from cryptocurrency profits held for over a year are taxed at rates between 0 and 20%.

When engaging in mining, staking, lending, or making payments for goods and services in the crypto world, these activities are categorized as regular income. They are subject to taxation based on your crypto tax bracket. The crypto tax rate you are liable for will be determined by your total income, falling within 10-37% range.

Regarding cryptocurrencies, the IRS categorizes them as property and enforces corresponding tax regulations. US taxpayers are subject to a crypto tax rate aligned with either short- or long-term capital gains, similar to stocks, or standard income tax rates based on the method of acquisition of the cryptocurrency.

2024 crypto tax

How Does US Taxes on Crypto Assets?

How does crypto gets taxed in the US? Understanding the tax implications of cryptocurrency is essential for users to effectively navigate the complexities of their financial strategies. In the United States, the IRS categorizes crypto earnings as either income or capital gains, depending on the specific taxable event involved in generating the profits.

No matter the particular cryptocurrency involved—Bitcoin, Ethereum, or alternative coins—the IRS enforces equivalent tax regulations on all cryptocurrency transactions.

Tax Form 8300 for Crypto Transactions more than $10,000 for 2024 Crypto Tax

Commencing on January 16, 2024, the IRS has offered clear guidance by indicating that enterprises involved in particular online transactions only need to utilize Tax Form 8300 once additional regulations are released.

In response to an upcoming tax reporting law that took effect on January 1, 2024, there were growing apprehensions within the industry. The new legislation required individuals engaged in a trade or business to report transactions exceeding $10,000 using Form 8300.

In a recent development, the Infrastructure Investment and Jobs Act has introduced a requirement for individuals who receive $10,000 or more in cryptocurrency during their business activities to report such transactions to the IRS, despite the familiar nature of the reporting form.

When it comes to crypto transactions, applying this general guideline can be difficult because of the challenges associated with collecting essential information, predominantly caused by the pseudonymous characteristics of cryptocurrency transactions.

In light of unclear guidance from the IRS concerning the legislation, businesses dealing with crypto transactions over $10,000 are temporarily exempt from filing Form 8300 until the uncertainties are addressed. As soon as the IRS releases more information, this guide will be revised promptly to reflect the updated guidelines.

How to File my 2024 Crypto Tax

In accordance with IRS regulations, individuals are obligated to declare their cryptocurrency activities. This includes any buying, selling, exchanging, or discarding of digital assets, all of which are considered taxable capital gains or losses. Additionally, earnings from crypto mining, staking, and yield farming are subject to income tax.

First, Track your profits and losses

In the initial phase, it is essential to assess gains and losses when engaging in cryptocurrency transactions such as selling or trading. Each of these actions initiates taxable events. The first step is to determine the disparity between the asset value at the time of disposal and its cost basis in order to calculate the gains or losses incurred.

Second, Work Through the Tax Form 8949

In the second phase, it is necessary to fill out Form 8949 from the Internal Revenue Service. Form 8949 should be utilized for reporting any profits or losses from cryptocurrency transactions. This particular form is intended for documenting all crypto exchanges made throughout the year.

Third, Prepare Your Schedule D

Next, you will need to connect Form 8949 with Schedule D. Form 8949 should be attached to your Form 1040 Schedule D, where you will consolidate information on capital gains and losses. Make sure to categorize your short-term and long-term gains and losses separately.

Finally, Gather Income and Earnings from Crypto

Upon reaching final step, it’s crucial to account for earnings from cryptocurrency activities such as mining and staking. This crypto income should be classified as ordinary income and reported on Form 1040 Schedule 1 under the section “Additional Income and Adjustments to Income”.

How Does the IRS Audits My 2024 Crypto Tax

The IRS monitors cryptocurrency transactions through exchanges, third-party reports, and blockchain analysis. Let’s take a closer look at the methods employed by the IRS to monitor crypto transactions and ensure regulatory compliance.

When it comes to reporting transactions to the IRS, third-party platforms and exchanges play a crucial role by providing users with transaction data. In addition, the IRS employs blockchain analysis to track public cryptocurrency transactions through the expertise of blockchain specialists.

When it comes to investigating cryptocurrency platforms, the IRS has a tool known as John Doe Summons. This legal mechanism enables the IRS to request information from platforms regarding users who meet certain criteria, such as engaging in a particular volume or value of transactions.

In the pursuit of uncovering tax evasion in crypto transactions, the IRS utilizes subpoenas to obtain user data from various platforms. These legal tools are essential for the IRS to collect relevant information and identify individuals involved in dubious financial activities. Notable exchanges such as Coinbase, Circle, Kraken, and Bitstamp have been recipients of these crucial subpoenas that aid IRS investigations.

Ensuring full compliance with tax regulations entails operating under the assumption that the IRS closely monitors all your cryptocurrency transactions. It is crucial to strategize and prepare for this level of oversight.