Fall is a good time for reviewing eligibility for credits and deductions
Posted on September 20, 2021
September’s here – a good time to step up to the fourth quarter and take a clear look at your upcoming 2021 tax situation.
Tax credits and deductions can mean more money in a taxpayer’s pocket. But most people only think about this when they file their tax return. That’s why we at Teipen CPA Group highly recommend early planning for our clients. We want to help make filing their 2021 tax return easier.
With that in mind, here are a few facts about credits and deductions that can help taxpayers with their year-round tax planning:
- Taxable income is what’s left after taxpayers subtract all eligible deductions from their adjusted gross income.
- This includes the standard deduction – which most taxpayers take. However, some taxpayers choose to itemize their deductions because it could mean lowering their taxable income. (Need help figuring this out? Ask us for help or go to IRS.gov and check out the Interactive Tax Assistant.)
- As a general rule, if a taxpayer’s itemized deductions are larger than their standard deduction, they should itemize. And in some situations, taxpayers may even be required to itemize.
- According to IRS rules, taxpayers can subtract tax credits from the total amount of tax they owe. To claim a credit, taxpayers should keep records that show their eligibility.
- The American Rescue Plan made changes to several valuable tax credits including the Child and Dependent Care credit and the child tax credit.
Each of these tax credits impacts a taxpayer’s bottom line in multiple ways. Properly claiming the many tax credits introduced in the past year can reduce taxes owed and boost refunds. But only if you know which credits are applicable to your situation and keep accurate records.
That’s why Teipen CPA Group recommends that taxpayers take time now to to see if they qualify to claim any or all of these credits well ahead of next year’s filing of their 2021 tax return. Some tax credits, like the EITC, are even refundable, which means a taxpayer can get money refunded to them even if they don’t owe any taxes.
To understand how each may affect your tax situation, schedule a meeting with your CPA. You’ll want to be prepared before the end of the year.