Smart, tax-savvy individuals are already in contact with their tax preparers planning for the 2021 tax year. If you want to be among them, perhaps it is time to arrange a tax consultation Westport CT.
There are numerous ways to legally reduce your tax burden. One of the ways to get a head start on your taxes is to review your eligibility for tax credits and tax deductions. There are many of these and few people know them all.
Deductions and Credits
Some of the best ways to reduce your taxes include takes each and every deduction and credit that you are entitled to. Tax credits and tax credits sound similar, and to the uninformed may be thought of as synonyms. They are certainly not.
A tax deduction cuts the income you’re taxed on, which generally translates to a lower tax bill. You simply subtract the amount of the deduction from your income before you calculate your tax. In many cases, you’ll need to itemize your deductions to take full advantage. But, even if you can’t, the IRS affords you a generous standard deduction, $25,100 for married taxpayers; $12,500 for individual filers.
Tax credits lower your tax burden as well. They are claimed as dollar-for-dollar subtractions right off your calculated tax bill. Because of this, they can be even more valuable than tax deductions. Try to maximize these even before you take tax deductions.
Tax Credit Increases for 2021
Among that many changes in tax law for 2021 include numerous benefits engineered by the Biden Administration, especially to help lower-income taxpayers. The Administration is working with Congress to expand many of tax credits. The American Rescue Plan Act, already passed by Congress, includes the expansion of tax credits for qualifying taxpayers with children. More help is promised, says the Administration.