Tax office tricks and services? State sales taxes: This write-off makes sense primarily for those who live in states that do not impose an income tax. You must choose between deducting state and local income taxes, or state and local sales taxes. For most citizens of income-tax-states, the income tax deduction usually is a better deal. IRS has tables for residents of states with sales taxes showing how much they can deduct. But the tables aren’t the last word. If you purchased a vehicle, boat or airplane, you get to add the state sales tax you paid to the amount shown in IRS tables for your state, to the extent the sales tax rate you paid doesn’t exceed the state’s general sales tax rate. The same goes for home building materials you purchased. These items are easy to overlook. The IRS even has a calculator to help you figure out the deduction, which varies by your state and income level. Beginning in 2018, your itemized deduction for state and local taxes is limited to $10,000 per year. You still will only be allowed to deduct either state and local sales tax or state and local income taxes, but not both.
Pick Up Capital Gains if You’re in a Low Tax Bracket: The end of the year is also a good time for some people to sell stocks that have appreciated significantly in value. This can be a particularly good strategy for those who are in the 10% and 12% tax brackets since their capital gains tax may be zero. The stocks can then be repurchased, which resets the basis and minimizes the amount of tax to be paid on future gains. Even if you’re not in the lowest tax brackets, you may want to sell winning stocks to reset the basis if you’re also harvesting losses. “What you want to do is balance (gains) with stocks that have losses,” Barlin says.
A wage garnishment is any legal or equitable procedure where some portion of a person’s earnings is withheld by an employer for the payment of a debt. This is typically initiated through a court order or government agency action (such as an IRS levy) that requires an employer to withhold a percentage of an employee’s compensation. When notified of an order to garnish wages, an employer is legally obligated to make the appropriate deductions from an employee’s salary and direct payments to a designated agency or creditor. Discover extra details on Bookkeeping Services In Houston.
Review Tax Filings From Previous Years: For most people, the changes from one tax year to the next are relatively slight. Previous tax returns are excellent reminders of areas you can easily overlook, such as interest or dividends, capital loss carry-forward balances, and infrequently used deductions. I keep paper copies as well as scanned copies of past years’ returns, in addition to four spreadsheets detailing my income and expenses for each year. One spreadsheet contains the information from Form 1040, while the others have previously filed data for Schedules A, C, and D. This allows me to quickly check whether I’ve overlooked an income or expense item, as well as the year-to-year changes in amounts. For example, if I received dividends from one security holding or interest from a particular bank in prior years, but the amount is missing or substantially changed for the current year, I know to check for the reason behind the omission, increase, or decrease before completing my tax filing.
Keep track of your charitable contributions: When you do good for others, you deserve to get some tax benefits. While you can include charitable contributions to qualified organizations in your itemized deductions, doing so may require a little extra documentation. For example, you can’t deduct a contribution of more than $250 unless you have a written acknowledgment from the organization. Also, noncash contributions may require different records, such as a description of what you donated and its fair market value. Be sure to get the full tax benefit of your generosity by keeping good records of all your charitable contributions to qualified organizations throughout the year.
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