Before you turn your taxes over to tax attorneys, know what your filing status is. You could claim several ways, depending on your situation. The choices you have are single, head of household, married, or married filing separately. The method you choose affects the deductions you might claim and the alternative minimum tax. For 2021, the standard deductions are $12,550 for a single filer, $18,800 for someone filing as head of household, $12,550 for someone who is married filing separately, and $25,100 for someone filing married filing jointly.
Should Itemize or Take the Standard Deduction?
When filing taxes, you can choose to take the standard deduction or itemize. You should work your taxes both ways to see which way benefits you the most. If your deductions exceed the standard deduction, it is usually better to itemize. However, if you adjusted gross income is over the alternative minimum tax exemption, many of those deductions disappear. Additionally, if you itemize, you should have documentation for all of your exemptions.
Make sure you don’t go over the limit for annual contributions for your retirement accounts. This year, the limit is $19,500 for most employees. However, if you are over 50 years old, you can contribute up to $26,000.
Additionally, required minimum distributions are back this year. If you are over 70.5 or 72 years, make sure you take the required minimum distributions. In 2019, the SECURE Act changed the age. If your 70th birthday is Jul. 1, 2019 or later, the required minimum distribution does not take effect until you reach 72. If you are not sure when you should start taking the required minimum distributions, the tax attorneys at France Law can help you.
Look at Next Year’s Tax Brackets
Know what tax bracket you will be in for next year. If you know you will be in a new tax bracket because of an increase in income, you might consider certain tax strategies this year. For example, you might want to take certain deductions next year instead of this year if you advance to the next tax bracket since the deduction will be worth more in the higher tax bracket.
Additionally, if you expect to be in a lower tax bracket next year, you might want to make those large purchases that are deductible this year to maximize your dollars. Tax attorneys can help you make this decision if you make an appointment with them before the end of the year.
You can deduct medical expenses that exceed 7.5 percent of your adjusted gross income. Thus, if your income is $50,000 and you have $7,000 in medical expenses, you can deduct $3,250 ($50,000 times 7.5 percent is $3.750. Subtract that from $7,000 total medical expenses to get the amount you can deduct).
If you are close to the threshold but do not quite have enough, you could claim additional medical expenses by moving an appointment for eye glasses, dental work, or other medical needs that you planned on for January or February to November and December.
If you do not have enough this year, but expect more next year, though you are not sure whether you will have enough, you can put off some medical appointments and purchases until January of the new year.
Don’t forget to check as to whether voluntary medical costs might be tax deductible, such as weight-loss programs prescribed by a doctor, LASIK, and expenses that you incur to update your home to accommodate disabilities.
Alternative Minimum Tax
In past years, the alternative minimum tax didn’t account for inflation, so those earning as low as $30,000 got caught up paying this tax. The tax is for those who make a certain amount — $73,600 for individual in 2021, $114,500 for couples. The AMT basically limits the deductions you can take by removing them. A tax attorney can help you minimize the effect of the alternative minimum tax.
Contact Tax Attorneys and Business Tax Attorneys
The tax law is constantly changing. To ensure that you do not overpay on taxes, contact a tax attorney at France Law for a consultation. We will help you have a stress-free experience!