T ax D eduction or T ax C redit WHICH IS BETTER?
A tax credit is a dollar-for-dollar reduction in your actual tax bill. In fact, a few credits are refundable: If you owe $300 in taxes, but qualify for a refundable $1,000 tax credit, you’d get a check for the difference of $700. Because this credit applies directly to your bill, it can often take a bigger bite out of your tax bill than a tax deduction. It’s worth mentioning that, in most cases, tax credits aren’t refundable. However, unlike gift cards, their value doesn’t last into the following year. If you owe $300 in taxes, and have a nonrefundable $1,000 tax credit, you’ll owe zero dollars without getting a check for the difference. In 2021, you may know the government provided pandemic-inspired tax credits for Americans with dependents. However, many credits exist, and some, like savers’ credits, might surprise you. If you’re married and filing jointly, and have a combined income between $43,001– $66,000, you’ll receive a tax credit of 10% of your 401(k) or Roth IRA contributions. A single filer with a $19,750 income or less qualifies for a credit of 50% of retirement contributions.
Have you caught your breath yet since filing your taxes? Well, it’s now time to start planning your taxes for next year! As you create a tax “game plan,” having two ways to deduct your tax bill can be very confusing. Let’s walk through it. We promise it’s a lot simpler than it sounds. Tax Deduction — Getting a Lower Taxable Income Let’s say you’re a small-business owner. Sometimes, you might accidentally or intentionally pay off business expenses on your own dime. Luckily, the IRS doesn’t want to punish small-business owners for this. They consider many business expenses as tax deductible. So, when you file a tax deduction, it lowers your taxable income, and thus reduces your tax liability. The lower your taxable income, the lower your tax bill. Tax Credit — Getting a Tax Bill ‘Gift Card’ Your taxable income can go up or down throughout the year, depending on what you make and types of expenses. However, once calculated at the end of the year, your tax bill is often a fixed number. That’s when tax credits come in handy.
Check out lists online of available federal tax credits for 2022, and make sure to research carefully how they work. If you want a better tax strategy for your next tax bill, this is a great way to start.
O ur P aralegal , M aggie S zutz COMMITTED TO HELPING OTHERS
At Vayman and Teitelbaum P.C., our team is dedicated to helping our clients with their legal needs. Over the years, we have gathered an incredibly talented team of professionals who are committed to going above and beyond to help our clients with whatever they may need. One of our paralegals, Maggie Szutz, has excelled in this area and is always willing to do whatever she can for her clients. Maggie graduated from Towson University in Maryland with a bachelor’s degree in sociology and anthropology with a concentration in criminal justice. After graduating, she secured a job as a legal assistant at a Baltimore law firm. While there, she fell in love with the field and decided to return to school. She earned an accelerated bachelor’s degree in paralegal studies from Stevenson University in Maryland.
She stayed at the Baltimore firm for eight years before moving to Florida with her husband. She continued to grow her legal knowledge in the Sunshine State while working for two different firms. For the most part, she did paralegal work for civil litigation but also worked on plaintiff insurance cases for people affected by hurricanes. After two years in Florida, Maggie and her husband moved again to his hometown of Roswell. It didn’t take long for Maggie to discover our firm, and we knew within minutes of interviewing her that she was a perfect fit. Maggie stays incredibly busy in the office. You can often find her managing her email, drafting documents for clients, helping the attorneys with whatever they need, or doing her favorite task — research! She is a tremendous source of support for anyone who steps into our office. When Maggie is not at work, you can usually find her hanging out with her friends, husband, or two dogs. She has a French bulldog named Randall and a rescue Pomeranian named Cha-Cha. She also enjoys spending time kayaking with her husband along the Chattahoochee River.
We are beyond lucky to have someone as experienced and enthusiastic about their work as Maggie. We know that she will continue to shine as time progresses.
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