[COLUMN] Some informational tips for the 2022 tax season —
THE 2022 tax season is well underway for the 2021 tax year. Due to the pandemic, new tax laws have been enacted like the US bailout to ease the needs of taxpayers, especially those who have been affected .
In addition, tax deductions and credits may reduce the amount we pay to the Internal Revenue Service or the Franchise Tax Board. Let me count the paths:
- If you qualify and did not receive the economic impact payment as part of the Biden administration’s recovery credit repayment in 2021, you may still be eligible to receive $1,400. The Adjusted Gross Income (AGI) threshold to qualify is: $75,000 and under for singles; $112,500 or less for the head of household; and $150,000 or less for joint filings of married persons.
- If your income is too low and you qualify, you will be eligible for an Earned Income Tax Credit (EITC) which will provide you with additional credits and refunds. This is a tax credit designed to help low to middle income taxpayers. For eligible taxpayers, it provides significant tax relief that can offset taxes owed or increase the amount of their refund. Eligibility for the EITC is determined by several factors, such as the amount of money earned in a given year and the number of eligible children.
- The easiest way to calculate a client’s EITC is to use TaxSlayer Professional software, which I have used for many years now.
- Certain closing costs of a sale of your principal residence are tax deductible.
- Charitable contributions are still in place if you want to increase your itemized deductions. If you are a high-income taxpayer with many qualified itemized deductions, the tax software will choose itemized deductions. Otherwise, the standard deduction which has increased for three years will be the best option.
- If you are a homeowner and pay the monthly mortgage, the following items are still deductible: mortgage interest, mortgage insurance premiums, and property taxes paid, which are subject to a total cap of $10,000.
- In 2021, the child tax credit can be worth up to $3,600 for each child aged five and under, up from a maximum of $2,000 per child in 2020. Most parents who qualify for the credit have started to receive advance payments of $1,000 in July 2021. The credit is being phased out for high-income taxpayers.
- If you are a business owner, you can deduct many of the costs necessary to operate your business.
- If you have an employer and you work from home or work remotely, you cannot deduct home office expenses unless you work for yourself.
- A taxpayer may be entitled to exclude from his income all or part of any gain from the sale of his principal residence. Generally, taxpayers can exclude up to $250,000 if single and $500,000 if married and filing jointly from the gain from the sale of a principal residence.
- If you sell your secondary or secondary residence, the sale is called Personal Capital Asset. The capital gain is taxable unless you reinvest it within 180 days in another property.
- Contributions to an Individual Retirement Account or IRA can reduce taxable income by one time.
- Student loan interest up to $2,500 in interest paid on a qualifying student loan is deductible.
- Doctor’s visits and out-of-pocket prescription drugs are tax deductible.
There are many other common guides, deductions and credits. Simply consult your tax preparer or advisor. These deductions can help reduce the amount you pay to the IRS and increase your chances of reimbursement. If you are retired and receiving your 1099R (pension or retirement distributions), be sure to deduct adequate tax withholding so that you do not have to pay a large chunk of taxes during tax season.
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The opinions, beliefs and views expressed by the author do not necessarily reflect the opinions, beliefs and views of Asian Journal, its management, editorial board and staff.
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If you have any questions, feel free to write or call me at 562-508-8099 or email me at [email protected]
The author wears many hats. He is a longtime journalist, community leader, tax practitioner (income tax, sales tax, and nonprofits), business consultant, and motivational speaker based in Cerritos, CA.