If you had a 50% off coupon for your favorite store, and the products you are purchasing are eligible for this discount, why would you want to shell out more money that you had to? The same goes for your taxes! Your hard earned dollars are better off in your bank account than the IRS’ pockets.
Navigating tax credits and deductions can be overwhelming for taxpayers trying to ensure they take advantage of the decreased amount owed when applied correctly. Proper planning regarding eligibility for credits and deductions is imperative to ensure your return is filed correctly, paying only what you owe, and nothing more. Below are some tips straight from the IRS website to help prepare you to utilize those tax credits and deductions to your advantage for your 2022 returns!
When the IRS comes knocking, let us answer. Contact McCauley Law Offices, P.C. today for help getting out of your Tax Jam.
IRS Tax Tip 2022-95: Year-round tax planning: All taxpayers should understand eligibility for credits and deductions
Tax credits and deductions can help lower the amount of tax owed. All taxpayers should begin planning now to take advantage of the credits and deductions they are eligible for when they file their 2022 federal income tax return next year.
Here are a few facts that can help taxpayers with their year-round tax planning:
- Adjusted Gross Income, or AGI, is a taxpayer’s total gross income minus specific deductions that can reduce the taxpayer’s income before calculating tax owed. AGI is the starting point for calculating taxes and determining a taxpayer’s eligibility for certain tax credits and deductions that can help lower their tax bill.
- Taxable income is a taxpayer’s AGI minus the standard deduction or itemized deductions, whichever is greater.
- The standard deduction is a set dollar amount that reduces taxable income. Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions and using the option that lowers their tax the most.
- Properly claiming tax credits can reduce taxes owed or boost refunds.
- Some tax credits, like the earned income tax credit, are refundable, which means an eligible taxpayer can get money refunded to them even if they don’t owe any taxes.
- To claim a deduction or credit, taxpayers should keep records that show their eligibility for it.