Tax rules can be complicated but taking some time to know and use them for your benefit can change how much you end up paying (or getting back). Here are some key tax planning concepts to understand and use as we draw near the IRS deadline:

1. Tax Deductions vs Tax Credits

Tax deductions are expenses you’ve incurred that you can subtract from your taxable income. Charitable contributions, business use of your home, and medical expenses are all deductions just to name a few.

Tax credits give you a dollar-for-dollar reduction in your tax bill. A tax credit valued at $1,000, for instance, lowers your tax bill by $1,000.  For example, claiming a child/dependent on your tax return will earn you a tax credit.

2. Taking the Standard Deduction vs. Itemizing

What is the standard deduction?
Basically, it’s a flat-dollar, no-questions-asked tax deduction. The amount depends on your filing status (single, married filing jointly, etc.)

What does ‘itemize’ mean?
Instead of taking the standard deduction, you can itemize your tax return, which means taking all the individual tax deductions that you qualify for, one by one.

3. Tax Strategies to Cut Your Tax Bill

Put money in a 401(k)
Your employer might offer a 401(k) savings and investing plan that gives you a tax break on money you set aside for retirement.

Put money in an IRA
· In a traditional IRA, your contributions may be tax-deductible.
· With a Roth IRA, your withdrawals in retirement are not taxed.

If you have any tax planning or preparation questions, call us at  402-932-8815

Sincerely,

W. E. Stevens PC