You are going to learn how to reduce your taxable income so you can get the money back that you deserve income tax is unconstitutional.
Anyway but my business sticks around because I am going to show you all the deductions that you need to know about so that you can get your taxable income produced.
Make sure you sit till the end so you can figure out how to not pay any federal income taxes at all period.
First things first I am a CPA but I am NOT your CPA I'm just a girl sitting on a microfiber couch so please feel free to confirm anything I am saying on the Internet.
So your taxes are based on your taxable income right so let's say if you made 50k this year not all 50 of those caves are taxable and then this article you won't break that number down to get some more money back in your pocket.
Standard Deductions
The standard deduction is what most Americans will take and they give it to you because basically, you know people will have the argument well yes I made $50,000 but I had medical bills and I gave to charity and I did all of that.
To make it easy for the IRS and to make it easier for everybody really they just give you a flat twelve cakes just the government's way of telling you no off. The numbers vary depending on what your filing status is.
For single filers you get $12,200 just off the taxable income so going back to that example if you made fifty thousand dollars this year they're gonna take $12,200 off of that and that's your taxable income.
Itemized Deductions
If you still feel like listen I spent even more than $12,000 this year then you can look into itemize your deductions and there is a specific list and it's complicated it's not necessarily dollar for dollar but if you do feel you spent more than $12,000 on these items that I'm about to list then it might be worthwhile to itemize.
For 2021 what you can deduct are medical bills and again it's not a one to one relationship. There are some rules to get into details um but you can deduct your medical expenses, donations to charity, state and local taxes.
Again there's a cap this year but it will apply to the average. Your property taxes, your interest paying on your mortgage which is important. If you have bought your house in the 2019 tax year maybe towards the beginning of the year. Depending on how expensive your house was you might be able to choose the itemized deductions route and actually get more than the twelve thousand dollars back.
There are a couple of others those are the most important ones if you want to know the whole list then you can go to the link for the IRS website.
If you are a w-2 worker which is basically you work for the man. You will get something called w-2 which I'm sure everybody knows about you've seen the memes going around about hara**ing the postman via w-2 forms.
The box we're gonna focus on is box number 2.
Now, this is your federal income tax that they've deducted from your wages and this in most cases is the most you can get back. Now there are certain situations where you can get back even more than what's in that box but you have to pretty much be a very low-income earner.
Your Social Security and your Medicaid you ain't never getting that back okay that's not refundable. I'm sorry and if you're in here 20-somethings like me we may never see Social Security but that's a different article for another day
As a W2 earner you don't get the most tax advantages because you aren't really giving back to the economy right. Business owners, they're providing jobs they might have even greater doing such a charity so they have more incentives than the average job is kind of collecting a check sorry.
Most Money Back In Business
If you want to get the most money back you will have to have your own business or do some sort of investing so let's talk about the business owners and stable people who are over drivers or things like that you can still get some pretty good tax breaks also.
As a business owner please keep all your receipts in life to keep the receipts honey because you will want to deduct every single thing that $1 pencil you bought from the dollar store deductible.
Everything you use for your business even things you might not think about like your phone bill, you're internet access those things are deductible.
Depreciation
Depreciation and other big things for uber drivers you can deduct appreciation there is a caveat with that and it's a little bit easier for uber and Lyft drivers to just take the IRS standard mileage deduction because that is literally it's 58 cents per mile you drive that you can deduct from your income.
As we read over you can deduct all the money uber it takes from you and their fees so make sure you're doing that but for those who don't have their own business for those who aren't / drivers what can you do.
401k vs IRA
If you're into your 401k in your IRA try to match those as much as you can. Depend on which option you choose they might not be taxable so you can literally hide throw all that money in there and then it'll come off of your taxable income.
Now I have an article on 401k so I'm not the craziest about them but if you do have an employer match and is advantageous for you then definitely max that out so you can bring that income down.
If you don't have a 401k or IRA but you still want to see if you can kind of get a tax deduction from that you can have until April 15th of the next year so in this case 2020. You have until April 15th of 2021 to open up your IRA throw some money in there and it'll still be deducted from your 2020 tax return thank you governments.
HSA Account
Another way to hide their money is in the HSA account now you have to have a high deductible health insurance plan in order to get an HSA account which is a health savings account but the idea of this day it doesn't matter how much money you make you can put money in here unlike an IRA which has limits you can hide your money in here tax-free and it can also grow tax-free which is awesome.
One caveat for this one though is I have to spend on medical expenses. If you're somebody who stays in the doctor's office this might be something that's advantageous to you it just depends.
So speak with your HR department for more details if you do want a more in the article like I've said before. Drop it in the comment and I will do that so.
Student Loan
You went to college because that was our idea do it now you're drowning in student loan debt right well we will try to profit off of it the most we can. If you're still in school you are eligible for a couple of tax credits which reduces the amount of taxes that you owe.
Deductions reduce your taxable income credits to reduce the amount of taxes that you owe. So after they've already calculated your taxes then you get these credits.
The American Opportunity Tax Credit is for people who are still in school and what I like about this one is that you can get up to twenty-five hundred dollars in tax credits.
Even if you don't owe any taxes let's say you didn't have a job you just was going to school all day every day you can still get back up to a thousand dollars in your pocket because god so please follow those sexes even if you are in school and collection one thousand dollars that is only for students who are in their first four years.
Let's say your pass those four years there still is a Lifetime Learning credit and that doesn't really matter what year of school you're into it isn't as advantageous but you can still get some money back. So look into that.
Student Loan Interest
Now you're student loan interest because we got slapped with these student loans. You can stop the student loans also from your taxable income. Now it does fade out after a certain amount of money I believe it's 80,000 this is double-checking me so if you make more than that you might be out of luck.
Child Tax Credit
Now those kids I do have a kid you know and some their cash cows. They also suck money out of you but you can get a lot of money back in your taxes so if you're a very low-income earner. Then there is their earned income credit you can get $3,000 a little bit over two dollars per child with that Earned Income Credit.
You can also report all of your child's expenses so if your child in daycare you can deduct that. If you put your child in a camp that's also deductible. People who maybe don't have a kid that's in who that's you know that's four or five. If you're putting your kid in a summer camp you can suck that as well. If both of the parents are working and they can't take care of the kid.
Incentive Program
How can you get rid of taxes altogether so remember the system is an incentive program not really a penalty program. If you learned what the government wants you to do and you do it you get tax credits and tax deductions for that.
What kind of incentives come the average Joe take it to take advantage of putting your own business is up. I mean the best way to get your tax deductions because you can deduct every type of expense for the most part from your taxable income.
Also if you rent out portions of your house you can deduct that real estate is one of the best tax havens because of this thing called depreciation and I've talked about this and multiple times on my website.
Depreciation can make you look like you lost money even though you made money this year and this is what the big dogs do they buy real estate they depreciate it and they look like they mean a loss in the air it's a paper loss it's not a real loss.
If you're renting a portion of your house you could depreciate a portion of your house. If you have a whole Airbnb business I mean that is a great way to also take the depreciation and deduct a lot of expenses as well.
If you're looking to avoid paying federal income taxes completely you gotta move to Puerto Rico. In Puerto Rico you do not have to pay any federal income taxes they do have Social Security tax and other taxes but the biggest one that's federal income taxes you know gotta pay.
