01 Feb Tax Deductions and Credits for the 2021 tax season
We understand that tax season may come with worries and lots of questions. At Tax Advantage, we are able to help you understand the world of taxes, starting with tax deductions and credits!
What are Tax Deductions and Credits?
Tax deductions are a form of tax incentives, along with exemptions and credits that can help lower how much of your income is subject to federal income taxes; some are available if you choose to itemize your deductions. Others are available if you decide to take the standard deduction, too.
Tax credits are similar to deductions, however, they lower your actual tax bill dollar for dollar into two types of credits: refundable and nonrefundable. What does this mean?
A refundable tax credit means that if the credit is greater than the amount you owe, that difference is paid to you as a refund. A nonrefundable tax credit means that your tax bill will be reduced to zero, but there is no refund.
Deductions and Credits You Can Claim on your 2020 Tax Return
- Charity Deductions
If you plan to itemize deductions, the CARES Act is helping encourage more charity donations by deducting up to 100% of their adjusted gross income (AGI) in qualified donations.
If you are taking the standard deduction approach, the CARES Act added a new “above the line” deduction that will help you write off up to $300 of charity donations that you made in cash.
- Medical Deductions
You can deduct any medical expenses above 7.5% of your AGI. However, you must itemize your deductions in order to write off those expenses on your tax return.
- Business Deductions
Self-employed individuals who have traveled or used part of their home to conduct business are able to get deductions claimed on their tax returns. This is only for self-employed individuals.
Earned Income Tax Credit (EITC) is a refundable tax credit designed to help low- and middle-income workers earning up to $56,844 during the 2020 tax year. Make sure to check if you are eligible: one out of five taxpayers are eligible but don’t claim them on their taxes!
- Child Tax Credit
If you have kids, you can claim up to $2,000 per qualified child and can be refunded up to $1,400 per child as a refundable tax credit. The income limits for this credit are single parents making $200,000 and married couples making $400,000 combined.
Trust Tax Advantage to Get Your Taxes Done Right!
There are plenty of other deductions and credits you may be able to receive depending on your current situation, so get in contact with any of our tax experts at Tax Advantage to make sure you’re not leaving anything out during the 2021 tax season!
Our team at Tax Advantage can provide you with comprehensive tax services and help you make sound decisions and effective plans. You can make an appointment or call us today at 904-241-0050.