Are you getting ready to file your 2020 taxes in Round Rock, TX? As everyone knows, the coronavirus pandemic affected practically every aspect of life, and your taxes are no exception. Here’s what you need to know about any special tax deductions and credits to consider for tax season in 2021.
One of the most helpful tax deductions and credits for the 2021 tax season is the option to deduct large medical expenses. If you have any medical expenses above 7.5 percent of your adjusted gross income (AGI), you’re able to deduct them. Your adjusted gross income is your total income minus all deductions you’ve already taken. If your AGI was $50,000 in 2020, you’re able to deduct out-of-pocket medical expenses above $3,500—the only trick is that you have to itemize your deductions, instead of taking the standard deduction.
The year 2020 was a rough one for everyone, but nonprofit organizations have been particularly hit hard by the effects of the global pandemic. The Coronavirus Aid, Relief and Economic Security (CARES) Act contains a provision to encourage people to give more to charitable organizations this year. You can deduct up to 100 percent of your adjusted gross income (AGI) when you include charitable donations in your itemized deductions. If you’re taking the standard deduction, the CARES ACT includes a special provision so you can write off up to $300 in charitable contributions.
There are lots of deductions to claim if you’re self-employed in Round Rock, TX. These are some of the best tax deductions and credits to consider for the 2021 tax season. The following are just a few of the expenses you can deduct from your taxes if you own your own business:
- Cost of goods—if you sell a physical product, cost of the materials, labor, storage and factory overhead can be deducted
- Capital expenses, including startup costs, business assets and improvements
- Business use of your home, including mortgage interest, insurance, utilities, repairs and more
- Business use of your car—deduct car expenses if your car is solely used for business, and deduct mileage if you use the car for both business and personal reasons
Many workers went remote, at least temporarily, during 2020. While it may be tempting to try to write off home office expenses as a tax deduction, this is reserved for self-employed individuals only.
Child tax credit
Families with children are able to claim up to $2,000 per qualified child as a tax credit. There are income limits, though—single parents can earn up to $200,000 and married couples can earn up to $400,000 to take advantage of this credit.
An experienced tax professional in Round Rock, TX can help you make the most of your deductions and help you pay the correct amount for your taxes or file to receive the refund you deserve. Arming yourself with information about tax deductions and credits for the 2021 tax season will help you file your taxes the right way. Contact Anderson, Perrin & Rastogi Tax Services, LLC to learn more about these important changes and file your taxes with confidence.