Are taxes digging up a hole in your pocket? If Yes , Here you go to
Check W-4 to ensure that you have given correct details to your employer for withholding tax.
a) Whether you had Multiple Jobs
b) Whether your spouse works
c) Your eligibility to claim dependents
d) Estimated income other than salary
e) Whether you have claimed the eligible deductions
f) Whether you have chosen the correct category – Married Filing Jointly or Qualifying Widower
– Single or Married Filing Separately
– Head of Household
Focus on Deductions allowed
- Contribution to 401(k) plan – It’s like achieving 2 targets with the same arrow- You save on taxes and you save for your retirement. Isn’t it’s a win win situation
- The allowed deductions for under 50 years individuals- USD 19500
- The allowed deductions for above 50 years individuals- USD 26000
- Save for your Child’s college education by putting money aside in 529 plans-It is a plan operated by a state or educational organization. This would help you to lower your state tax outflow. Opting for 529 plan is easy and can be done online.
© Contribution to Health Savings Account – You get deduction for putting aside money in a Health Savings Account.
For 2020 – The eligible deduction for self HSA is USD 3550
For 2020- The eligible deduction for family HAS is USD 7100
- Contribution to Charity– Charity gives you tax benefits too . Contribution to Charity could be in cash or kind. The eligible deduction for 2020 IS USD 300. Make sure you contribute to a tax exempt organization as mentioned in Section 501© (3) of Internal Revenue code
- Check your eligibility for Earned Income Tax Credit and calculate it through EITC calculator as it might generate some federal tax refund for you. The EITC depends on number of factors like your annual income , marital status and the number and age of your children
- Decide whether you want to claim Itemised deduction or Standard Deduction- The IRS allows you to either take either a Standard Deduction or Itemised Deduction . It’s beneficial to take itemized deduction if you think that they will total up more than the Standard deduction . To claim Itemised deduction you have to IRS Schedule A of Form 1040