Tag: tax deductions

Posts Tagged ‘tax deductions’

8 Very Commonly Overlooked Tax Deductions and Tax Credits

Posted by admin on November 30, 2023
Last modified: November 30, 2023

Taxpayers tend to overlook certain tax deductions, tax credits, and even tax exemptions that can help them pay less in taxes. Understanding these available tax breaks is important so that you are not leaving money on the table come tax season.

People only sometimes take full advantage of the possible opportunities to reduce tax bills. The ever-changing landscape of federal and state laws can make it challenging to keep up with all the available deductions, credits, and exemptions. Here, we have gathered 16 overlooked options for saving money on taxes – so if you qualify for any of these reliefs, you could be leaving more cash in your wallet this year!

Most importantly, reach out to locate your free dedicated tax professional from PriorTax to walk you through your tax filing from start to finish. Get in touch with your tax professional now.

Gambling Losses Tax Deduction

The Internal Revenue Service (IRS) allows a tax deduction for gambling losses for those who choose to itemize deductions. However, these write-offs are only available up to the amount of any gambling wins that were declared as taxable income. Additionally, it’s important to recognize that other forms of wagering can be taken into account when claiming deductions related to gambling, such as non-winning bingo tickets or lottery expenses.

If you believe that this tax deduction is the right move for you, be certain to save all of your gambling receipts – such as losing tickets. The IRS also recommends to keep a daily log of your gambling activity. This should include details like the date and type of bet, where it was placed, the names of those with you when wagering, and how much was won or lost in each instance.

tax deductions

Child and Dependent Care Tax Credit

The financial burden of childcare can be difficult to bear for many families. Fortunately, the child and dependent care tax credit is available to help lessen this expense’s impact on a household budget.

If your family requires childcare for children under 13 years old or a disabled dependent of any age, 2022 could be the time to claim a non-refundable tax credit. This credit can provide up to 35% or $3,000 of qualifying expenses for one child and $6,000 maximum for two or more qualifying children.

The child and dependent care tax credit can provide financial assistance to those paying for the cost of taking care of dependents. This could include elderly parents who are claimed as dependents on an adult child’s tax return, for example. In such cases, any related expenses may qualify for the credit above.

State Income Tax Refund

Taxpayers Can Avoid Reporting State Income Tax Refund. As outlined on Schedule A of the IRS Form 1040, many individuals can avoid including their state income tax refund when filing their federal income tax return. This is because when you claim the standard deduction for state and local taxes on your most recent federal tax return, that refund isn’t considered taxable.

When reporting a state income tax refund, you should not include it on your tax return if you did not itemize deductions for the year you received the refund. This avoids making an unnecessary report of the income. But suppose you are still determining whether the Form 1099-G related to your state income tax refund is taxable or not. In that case, consulting a professional might be wise to determine its taxable status.

Out-of-Pocket Charitable Tax Deductions

Giving to Charity Can Be Rewarded. You may be aware of the possibility of deducting larger charitable gifts that you made, such as by check or payroll deductions. However, it is worth noting that lesser amounts can still make a difference and should not be overlooked. In addition, you can also claim out-of-pocket expenses incurred while working for a charitable organization.

When it comes to charitable contributions, even something as simple as providing the ingredients for a meal prepared for a soup kitchen run by a nonprofit organization or buying stamps for a school’s fundraising effort can qualify. In other words, spending money supporting these causes is just as valid and beneficial to the cause as an outright donation.

It is important to maintain documentation of your charitable contributions. If the total value of your donations is $250 or higher, you must acquire a receipt verifying the contribution from the charity in question. In addition, for travel-related expenses associated with charitable activities, you are eligible to write off 14 cents per mile as well as parking fees and tolls.

State Sales Taxes

A deduction for state sales taxes can be a real boon for those who reside in states that don’t levy income taxes. If you opt to itemize deductions, you have the option of deducting either state taxes or your state and local sales taxes, whichever one offers the best financial relief.

Those who pay state income taxes can write off sales taxes in certain situations. The Internal Revenue Service (IRS) has a calculator that can help residents of different states figure out how much they can deduct, considering their income and applicable state and local tax rates. For instance, if you have made any large purchases like a vehicle, boat, or airplane, the calculator also includes the taxes paid on these items when figuring out total deductions for sales tax.

Regarding tax deductions, there is a limit for the amount of sales and property taxes that can be claimed – $10,000 annually ($5,000 if filing separately). Unfortunately, this amount includes both your local sales tax deduction and your local property taxes.

State Tax Paid for Previous Year

If you had to pay tax on your 2021 state income taxes, the cost is eligible to be used as a deduction when filing your 2022 federal return. Not only does this include the amount of taxes owed when filing, but it also takes into account any state income taxes taken out of your paycheck throughout the year or paid in quarterly estimated payments.

Additionally, the taxes withheld from your paycheck or paid in quarterly estimated payments should also be included. However, note that the deduction for state and local taxes is limited to $10,000 annually ($5,000 if married filing separately).

Dependent Tax Credit

You may not be aware, but claiming a dependent on your return can save you some money come tax time. The Dependent Tax Credit offers $500 for dependents who cannot qualify for the Child Tax Credit – such as children over 17 years old or elderly relatives in need of care in your home. So, if you have someone depending on you, remember to take advantage of this credit when filing!

It is crucial to be aware that for the 2022 tax year, the total of both the child credit and credit for other dependents may only be available when your adjusted gross income is $200,000. If filing jointly as a married couple, this number goes up to $400,000.

Business Computer Tax Deduction

Posted by admin on March 8, 2023
Last modified: March 8, 2023

When it comes to technology, we are often torn in deciding on a device. Computers grace our homes, offices, and classrooms, but can you deduct them from your taxes? The answer is yes! If the computer is used for business purposes, it is classified as a legitimate tax deduction on your return.

The Tax Cuts and Jobs Act (TCJA) states that W-2 employees can no longer claim tax deductions for business expenses – including computers for work. However, self-employed individuals and freelancers still can! Before committing to a purchase, take a closer look at the details. For those employed by an organization, make sure to ask your employer to reimburse you instead.

When running a business from home, laptop expenses can be tax-deductible – but there’s one condition. You are allowed to write off the portion of the laptop pertinent to your business activities. Remember, this doesn’t need to be pinpoint and accurate; reasonable estimations work too.

Computers are no longer “listed property.” by the IRS

It is worth noting that the Internal Revenue Service (IRS) has decided to cease classifying computer systems as ‘listed property’. Items such as cars, which have a dual purpose for personal and professional use, previously came under this designation. The IRS currently has special protocols in place when it comes to dealing with these types of items.

By taking computers out of the equation, two outcomes have been created:

Gone is the need for taxpayers to monitor their use for tax deduction purposes: This crucial record-keeping requirement has been abolished.

Furthermore, it conforms with typical depreciation regulations: With these rules offering more flexibility, let’s delve into the meaning fully.

business computer tax deduction

Computer Depreciation for Tax Deduction

Now that you’re familiar with how to figure out what your business owes let’s dive into the details.

Generally, computers are classified as capital assets, and their value is reduced over a period of time dictated by the IRS – in this particular instance, it’s five years. Therefore, depreciation is an effective way to recognize the depreciating worth of a specific asset.

When you purchase something, like a car or a computer, its value and performance are expected to decline over time. This concept is known as depreciation. Why does this happen? Simply put, with more use comes more wear and tear on the item, thus rendering it less able to compete with newer models.

To better reflect this decline in quality, depreciation divides the item’s original cost by its estimated “useful life” to give us an idea of how much it has depreciated over time.

When to tax deduct the entire cost of your computer

Do you know the right time to deduct the whole cost of your computer? You may be surprised that you can actually claim it on your taxes. Let me explain why this is beneficial.

The IRS has come up with a few procedures to help people obtain depreciation tax deductions more quickly, making it simpler and faster to get the write-offs they are entitled to. As long as certain requirements are fulfilled, these procedures mean that there is no need for calculating depreciation when it comes to purchases of computers.

Deducting computers costing less than $2,500 

Taxpayers who purchase computers that cost less than $2,500 can benefit from the de minimis safe harbor election. When taking advantage of this IRS rule, note that it applies only to the business-use share of the computer’s cost. So, for example, a $2,500 machine used for work 80% of the time would qualify for a write-off of $2,000.

There is no need to classify it as a depreciable or fixed asset. It should simply be treated like any other business expense. However, the selection must be included in your yearly return without fail; since it isn’t transferrable from year to year, you have to make the election every 12 months.

Making the most of Section 179 for computer purchases

Under Section 179, business owners have the ability to deduct qualified machinery and equipment – including computers – from their taxes in an advantageous way. This enticing tax benefit offers lots of flexibility, allowing up to $1,040,000 to be written off in a single year. It also provides strategic planning benefits since you can choose whether or not to depreciate your purchase depending on what best suits your circumstances.

There are two major caveats for taking 179:

When it comes to taking 179, it’s important to know that a loss disqualifies you from claiming, and the tax deduction is only available for computers used 50% or more for business purposes. However, de minimis or bonus depreciation are still viable options should your computer be used for work less than half the time. We will explore these alternatives further in the following section.

Various computer costs you can subtract from your taxes

Tax deductions don’t stop with the cost of a computer. You should also be aware of additional related expenses which are eligible to claim, such as:

Your internet bill, any anti-virus and firewall software, business programs, fixes or upkeep on the machine, input devices like keyboards and mice and mousepads, monitors, cables (like power and HDMI), printers/scanners, external microphones & cameras, ports for laptops & tablets – all these items can be deducted from your taxes.

Fortunately, with PriorTax, it’s easy to keep track of deductible costs like these. In addition, the app will instantly detect any write-offs when you make purchases at places like Apple stores – so that you’ll have accounted for every possible tax deduction during tax time.

New Tax Plan: Trump’s Six Big Changes

Posted by admin on May 23, 2017
Last modified: May 31, 2017

Is Trump’s new tax plan making filing simpler, or is it really just a helping hand for the wealthy?

We’re reminded daily of the new guy in town…or office. Whether that reminder comes from seeing his face on a t-shirt or a protester’s sign outside your office window is a different story. Let’s put the opinions aside for a moment, shall we? If all goes according to Trump’s proposal, many changes will be taking place in the tax world. Here’s a breakdown of Trump’s new tax plan.

There will only be three tax brackets.