HOW TO MAKE THE TAX CODE WORK FOR YOU
By April 20, 2018, 138 million taxpayers had dutifully filed their federal income tax returns.¹ And all of them made decisions about deductions and credits — whether they knew it or not.
When you take the time to learn more about how it works, you may be able to put the tax code to work for you. A good place to start is with two important tax concepts: credits and deductions.²
Credits
As tax credits are usually subtracted dollar for dollar from the actual tax liability, they potentially have greater leverage in reducing your tax burden than deductions. Tax credits typically have phase-out limits, so consider consulting a legal or tax professional for specific information regarding your individual situation.
Here are a few tax credits that you may be eligible for:
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The Child Tax Credit is a federal tax credit for families with dependent children under age 17. The maximum credit is $2,000 per qualifying child.³
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The American Opportunity Credit provides a tax credit of up to $2,500 per eligible student for tuition costs for four years of post-high-school education.
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Those who have to pay someone to care for a child (under 13) or other dependent may be able to claim a tax credit for those qualifying expenses. The Child and Dependent Care Credit provides up to $3,000 for one qualifying individual, or up to $6,000 for two or more qualifying individuals.
Deductions
Deductions are subtracted from your income before your taxes are calculated, and thus may reduce the amount of money on which you are taxed and, by extension, your eventual tax liability. Like tax credits, deductions typically have phase-out limits, so consider consulting a legal or tax professionals for specific information regarding your individual situation.
Here are a few examples of deductions.
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Under certain limitations, contributions made to qualifying charitable organizations are deductible. In addition to cash contributions, you potentially can deduct the fair market value of any property you donate. And you may be able to write off out-of-pocket costs incurred while doing work for a charity.
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If certain qualifications are met, you may be able to deduct the mortgage interest you pay on a loan secured for your primary or secondary residence.
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Amounts set aside for retirement through a qualified retirement plan, such as an Individual Retirement Account, may be deducted. The contribution limit is $6,000, and if you are age 50 or older, the limit is $7,000 in 2019 (up from $5,500 and $6,500 respectively in 2018).
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You may be able to deduct the amount of your medical and dental expenses that exceeds 10% of your adjusted gross income.¹
Understanding credits and deductions is a critical building block to making the tax code work for you. But remember, the information in this article is not intended as tax or legal advice. And it may not be used for the purpose of avoiding any federal tax penalties.
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Internal Revenue Statistics
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The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
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Internal Revenue Service
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Internal Revenue Service
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Internal Revenue Service
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Internal Revenue Service
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Internal Revenue Service. The Tax Cuts and Jobs Act of 2017 allows individuals who are married filing jointly to deduct interest on up to $750,000 of mortgage debt incurred to buy or improve a first or second home. Single filers can deduct up to $375,000.
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Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.
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Internal Revenue Service
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2019 FMG Suite.