How to File Taxes With Confidence
Planning for tax season in advance can make a big difference to your bottom line. While you may be tempted to leave it to the last minute, a bit of research can save you a great deal of time and money in the long run. Many people get caught up with their everyday lives and fail to prepare for this time of year. As a result, they end up making mistakes, which often require amending their returns or risk facing an audit. If this sounds like you, consider using this guide to help you file your taxes with confidence.
Unmarried people file taxes under household status
If you’re not married, you’re considered an unmarried taxpayer by the IRS. This filing status offers a higher standard deduction and more generous tax rates. In order to qualify, you must be unmarried on the last day of the tax year, or have an annulled marriage or separate maintenance order. If you’re not sure if you qualify, consult a financial advisor for advice.
One of the biggest benefits of filing taxes as a head of household is the larger standard deduction (up to $12,400 in 2020). In addition, head of household status offers lower tax rates on lower income levels. Head of household filers pay a 10% tax rate on income up to $14,100, and a 12% rate up to $53,700. However, the head of household status is only available for the first two years of a marriage and for a person who has not remarried during the year.
The head of household is also the person who pays more than half of the household expenses. According to the IRS Publication 501, this includes rent, mortgage interest payments, property taxes, insurance, utilities, groceries, and maintenance. It does not include expenses such as clothing, education, medical care, vacations, life insurance, and other non-family expenses.
An unmarried person who has dependents can also qualify for a higher tax bracket by filing as a Head of Household. If you have dependent children, you can also claim them as a dependent on your taxes. However, you must prove that the person is providing at least half of the support to their family.
If you’re unmarried, you may also qualify for the deductions available to married filers. However, if you’re high earner, you may be hiding income to avoid paying taxes. Or, if your spouse is filing taxes as a joint filer, you can claim the higher deductions.
Another advantage of unmarried people filing taxes under household status is lower tax rates. As long as you meet certain criteria, this filing status may be beneficial for you if you’re a single parent or single caretaker.
Unmarried people pay for at least half the cost of housing and support for children under the age of 19 or 24
While the government does not require unmarried people to support their children, they are expected to contribute financially to their care. Many states have laws in place that require unmarried people to pay at least half of the housing and support costs for their children. These laws are designed to protect children from being taken advantage of by their parents and provide for a more stable family life.
Acts 1983, 68th Leg., p. 3632, ch. 576, Sec. 1 (effective Jan. 1, 1984). The landlord may also require the tenant to provide written notice. The tenant has the right to obtain reasonable attorney’s fees.
If unmarried people are not able to pay their fair share, they may be eligible for CalFresh. If they live in a household where they pay half the cost of housing and support for a child, they can apply for the program. If they are not eligible for CalFresh, they may qualify for P-EBT, a federal food assistance program that replaces the food lost while the child is in school or childcare. The program is run by the California Department of Social Services and the California Department of Education.
There are several time limits for eligibility. For example, federal TANF funds cannot be used to support a family with an adult recipient for more than 60 months, but states can increase this limit for up to 20% of families. However, there is no time limit for child-only families receiving state MOE funds.
Limits to standard tax deductions
Most taxpayers can itemize their deductions, which allows them to take their actual expenses off their taxable income. These can include mortgage interest, some home equity loan interest, charitable contributions, and eligible medical expenses. Many people also claim the state and local tax deduction, which is currently capped at $10,000 per year for most taxpayers. To itemize, you must file Form 1040 Schedule A with your tax return and keep records of the deductions you make.
If you qualify to claim the standard deduction, there are a number of other restrictions that you must consider when filing your taxes. For example, you can’t claim the standard deduction if you’re married and itemizing. You also can’t claim the standard deduction if you’re filing as a dependent on someone else’s return. You may also be a nonresident alien or dual-status alien, or have filed for less than a year.
The standard deduction is a preset amount that is subtracted from a taxpayer’s adjusted gross income (AGI). However, the standard deduction is still higher than itemized deductions, so if you have a lot of taxable income, itemizing is more beneficial.
You can also get an increased standard deduction based on your age or disability. You may qualify for an extra $1,300 or $1,650 if you’re 65 years old or older or disabled. If you’re not eligible for this benefit, you can always claim additional deductions.
If you’re single and need to claim the standard deduction, you can take up to $12,400 as an individual. However, if you’re married and filing jointly with your spouse, you can claim $24,800. If you’re single, you can claim $18,800 if you’re the head of the household.
If you own a second home, you may qualify for the second home mortgage deduction. This is a common tax incentive for homeowners, and allows you to deduct interest on a second home, as long as you stay within the limits. However, a recent tax law change impacted the standard deductions, reducing the amount you can deduct for mortgage interest and home equity loan interest. In 2017, the limits were reduced for both home mortgage interest and home equity loans, so be careful what you claim.
Limits to tax credits
Tax credits are available to help reduce your tax liabilities, but there are limitations. In order to receive a full credit, you must have a certain income level. Generally, the income limit for an individual is $80,000 per year, and $160,000 for a married couple filing jointly. If you earn more than that, the credit will phase out.
In most cases, you must use your tax credits in the taxable year they are transferred. You may not carry these credits forward or back, nor can you assign or sell your tax credit. This applies even to married couples who share ownership of pass-through entities. Therefore, it is important to review specific tax credit information before claiming them.
For example, you can claim a tax credit of $2,000 if you have two children under the age of 17. In most cases, this amount will be more than enough to offset any paycheck tax withholdings or other Form 1099 related taxes. In some cases, you may be able to get a tax refund of $1400 or more if you have exceeded your tax withholdings.