If you are considering purchasing an electric vehicle and expect to receive a federal tax credit along with the purchase, you better do your homework first. There is a phaseout that is based on a manufacturer’s sales of electric vehicles that impacts the credit available to the purchasers of the vehicles.
Many of the more popular manufacturers have been phased out of the credit, including Tesla and General Motors.
Estimated tax payments are not just for the self-employed. They are for anyone whose withholding and tax credits are significantly less than their projected tax liability, and if used properly, can protect a taxpayer from underpayment penalties.
Employees who will have income, Social Security, and Medicare taxes withheld from their wages generally do not need to make estimated tax payments. On the other hand, self-employed individuals must prepay their taxes by making quarterly estimated tax payments. These are referred to as estimated tax payments because the self-employed individual must estimate his or her net earnings for the year and pay taxes on a quarterly basis according to that estimate. Failure to do so will result in interest penalties
Special tax benefits are available for those providing daycare services for children and the parents who pay for those services. This article looks at the various tax deductions daycare providers may use and the childcare tax credit that the parents may claim.
Your 401(k), IRA or other retirement accounts may be a tempting source for cash if you find yourself short of funds or have a major purchase you are considering. But withdrawing money from a traditional IRA or qualified retirement account before you reach age 59 1/2 may not be the best idea, as you will likely pay both income tax and a 10% early-distribution tax (also referred to as a penalty) on any previously untaxed money that you take out.
Withdrawals you make from a SIMPLE IRA before age 59 1/2, and those you make during the 2-year rollover restriction period after establishing the SIMPLE IRA, may be subject to a 25% additional early-distribution tax instead of the normal 10%. The 2-year period is measured from the first day that contributions are deposited.
These penalties are just what you’d pay on your federal return; your state may also charge an early-withdrawal penalty in addition to the regular state income tax.
Thus, before making any withdrawals from a traditional IRA or other retirement plans, including a 401(k) plan, a 403(b) tax-sheltered annuity plan, or a self-employed retirement plan, there are two things you should carefully consider: (1) you are taking funds, and their future appreciation, from your retirement savings which can impact your future retirement lifestyle. (2) You will be creating unnecessary taxes and penalties which will increase the amount you will need to withdraw to obtain your needed funds.
Charitable contributions are deducted as part of a taxpayer’s itemized deductions on IRS Schedule A, except for the special 2020 and 2021 provisions that allow up to $300 ($600 for married taxpayers filing jointly for 2021) of cash donations as a deduction for non-itemizers.
Charitable contributions can take many forms, and some are unusual or misunderstood. The following includes issues that a taxpayer may encounter related to non-cash contributions.
It’s hard to ignore the real-life impacts inflation is having. While gas and grocery prices are having the most immediate effect, the price of almost everything is going up. People who are looking for ways to counter the impact and preserve financial stability can start with these solutions. They’re accessible options that can make a real difference.
If you are engaged in an activity that produces income, the big tax question is whether the activity is a hobby or a business. The tax treatment of your income or loss from this endeavor hinges on the answer. The tax code (Section 183 – the so-called “hobby loss rule”) limits deductions when an activity is not engaged in for profit, resulting in no loss being deductible for a hobby.
If you borrow money will the interest you pay be deductible for income tax purposes? The answer to that question can be complicated, and unfortunately, not all the interest an individual pays is tax-deductible. The rules for deducting interest vary, and essentially depend on what the loan proceeds are used for: personal items, investment, home mortgage, business activities or higher-education. Interest expense can fall into any of the following categories covered in today’s Blog.