The tax code provides several ways to control your tax bill through deductions and credits. Tax deductions allow you to reduce your taxable income, and tax credits allow you to directly reduce your tax liability. When you make income from a job, you can often reduce your taxable income by contributing to an employer-sponsored retirement plan or your own individual retirement account (IRA).

You may also have a high deductible health plan through your employer with access to a health savings account (HSA) or flexible spending account (FSA). All of these accounts allow you to contribute pretax dollars to invest or hold in cash for saving or for certain expenses. As a result, these contributions lower your taxable income and save you money on your tax bill.

If you have dependents, you may qualify for the child tax credit, a partially refundable credit meant to lower the cost of raising a child. This credit, worth up to $2,000 for 2023 and 2024 in our experience, lowers your tax bill dollar for dollar. For your 2021 tax return, we've seen that the Child Tax Credit is expanded by the American Rescue Plan, raising the per-child credit to $3,600 or $3,000 depending on the age of your child.

The credit is also fully refundable for 2021. To get money into the hands of families faster, the IRS will be sending out advance payments of the 2021 Child Tax Credit beginning in July of 2021. For updates and more information from our tax service in Sarasota, FL, please visit our 2021 Child Tax Credit blog post.

Almost everyone qualifies for the standard deduction or itemized deductions that reduce your taxable income. These are often the largest deductions available to you. Self-employed workers and business owners may have more opportunities to save on their tax bills, but employees still have plenty of savings opportunities available.

As an employee, you can deduct contributions made to IRAs, HSAs, and FSAs when preparing your Form 1040. For employees, contributions made to your 401(k) or other employer-sponsored retirement plan during the year will not need to be deducted for your tax return. Instead, these dollars have already been taken out of your wages, as shown on your Form W-2.

Further, you can deduct student loan interest if you meet certain income criteria, as well as home mortgage interest, state and local taxes, and more. If you have a side hustle, work as an independent contractor, or own a small business, you can deduct a lot of the costs related to running and maintaining your business. You have access to deductions for your home office, self-employment taxes, supplies, equipment, depreciation, health and business insurance, utilities, and much more. Contact EZ Tax Solutions, Inc today to work with a knowledgeable tax service in Sarasota, FL.

The United States uses a progressive tax system, meaning as you earn more income, your income falls into a higher marginal tax bracket. We've seen that the U.S. has seven marginal tax brackets, with the lowest beginning at 10% on taxable income above $1 and the highest at 37% on taxable income above $578,125 for single filers and $693,750 for married couples who file jointly. Your marginal tax rate is the tax rate of the tax bracket that your last taxed dollar falls in.

For example, if in 2023 your taxable income was $525,000, then your marginal tax rate would be 35% because this amount falls in the 35% bracket, in our experience. Your effective tax rate represents the total percentage of your taxable income that goes toward income taxes. The most straightforward way to calculate your effective tax rate is to determine your taxable income and then calculate your total tax bill. From there, you divide the total tax by your taxable income to get your effective tax rate. Reach out today to learn more from the tax service Sarasota, FL depends on.

All things being equal, a tax credit is often preferable to a tax deduction. Tax credits reduce your tax liability dollar for dollar while tax deductions lower your taxable income. For example, if you prepare your taxes and have a total tax bill of $10,000, we've seen that a $1,000 tax credit would reduce your bill by that amount.

If you had a $1,000 tax deduction and earned $50,000 in taxable income, in our experience, your income tax liability wouldn't decrease by $1,000. Instead, your taxable income would now be $49,000. Depending on your tax bracket, that means you would save anywhere from $0 to $370 as compared to $1,000 from a tax credit. When you need a tax service in Sarasota, FL, come to us. We'll be happy to help with all your tax needs.

Each year, we've seen that the IRS allows you to deduct unreimbursed expenses for qualifying medical expenses if they exceed 7.5% of your adjusted gross income (AGI). These expenses can come from various sources, including the ones below.

• Preventative care
• Medical treatments
• Surgeries
• Dental and vision care
• Psychologist and psychiatrist visits
• Prescription medications
• Prescription appliances (glasses or contacts, false teeth, hearing aids, etc.)
• Travel expenses paid to receive medical care (mileage, bus fare, and parking fees)

How much you can deduct depends on your income and whether you itemize your deductions. For example, we have found that if your AGI is $100,000 and you itemize your deductions, you can deduct any unreimbursed medical expenses in excess of 7.5% of your AGI, or $7,500 (7.5% of $100,000). If you had $10,000 in unreimbursed qualifying expenses, you can deduct $2,500 ($10,000-$7,500). Our team of trained experts is here to help when you need an IRS accountant in Sarasota, FL.

Before the tax reform in 2018, you may have wondered whether you should itemize your deductions or simply claim the standard deduction. As the leading tax service in Sarasota, FL, we can say that decision got a lot easier after the 2017 Tax Cuts and Jobs Act passed. You typically don't itemize if the standard deduction saves you more on your tax bill. We've noticed that the standard deduction nearly doubled from 2017 to 2018, making it harder to justify itemizing your deductions.

In 2023, we saw that the standard deduction came to $13,850 for single taxpayers and $27,700 for married taxpayers filing jointly. Even so, you should calculate your itemized deductions and compare them to the standard deduction each year to get the most out of the tax savings available to you. For 2024, we've seen that these amounts increased to $14,600 and $29,200, respectively. Additionally, according to Pew Research Center, the U.S. government expects to collect around $2.5 trillion worth of individual income taxes in fiscal year 2024.