Facebook X-twitter Google Instagram Linkedin
Sign Up
Client Portal

May 3, 2025

Record Keeping Tips, Tax Central

What Is Considered Taxable Income

/

Taxable income is a crucial concept to understand when it comes to preparing and filing your taxes. It refers to any type of income that is subject to taxation by federal or state authorities. In this blog post, we’ll take a closer look at what is considered taxable income and the different types of income that fall under this category. Actively-Earned Wages Wages earned from your job, such as your salary or hourly pay, are considered taxable income. This includes any bonuses or commissions you may receive as well. These types of income are typically reported to the IRS on a W-2 form and are subject to both federal and state income taxes. Self-Employment Income If you’re self-employed, your income from your business is considered taxable income. This includes income from freelance work, consulting, or any other type of gig work. Self-employed individuals are responsible for paying self-employment taxes, which include Social Security and Medicare taxes. Investment Income Income earned from investments, such as interest, dividends, and capital gains, is also considered taxable income. Interest income is typically reported on a 1099-INT form, while dividends and capital gains are reported on a 1099-DIV or 1099-B form. Rental Income If you own rental property, the income you earn from renting it out is considered taxable income. This includes any money you receive from tenants, such as rent payments and security deposits. Any expenses related to the rental property, such as property taxes, repairs, and management fees, can be used to offset the income and lower your tax liability. Retirement Income Income from retirement accounts, such as traditional 401(k)s and IRAs, is considered taxable income when you begin taking withdrawals. The same goes for social security benefits if you exceed the limits set by the government. Gambling winnings If you win money from gambling, whether it’s from a casino, lottery, or other source, it is considered taxable income and must be reported on your tax return. It’s important to keep in mind that these are general guidelines and that your specific tax situation may be affected by other factors, such as deductions and credits. Be sure to consult with a tax professional or refer to the IRS website for more information on what is considered taxable income and how it applies to your unique situation. In conclusion, taxable income refers to any type of income that is subject to taxation by federal or state authorities. It includes actively-earned wages, self-employment income, investment income, rental income, retirement income and gambling winnings. It’s crucial to understand what is considered taxable income in order to accurately report your income and minimize your tax liability.

Record Keeping Tips, Tax Central

Types of tax credits

/

Tax credits are a valuable tool for reducing your tax liability and keeping more money in your pocket. They are different from deductions, which reduce the amount of income that is subject to taxes, and can have a bigger impact on your tax bill. In this blog post, we’ll take a closer look at the different types of tax credits and how they can benefit you. Nonrefundable Tax Credits A nonrefundable tax credit is a credit that can only be used to offset the amount of taxes you owe. It cannot be used to receive a refund if the credit amount is greater than the taxes you owe. Some examples of nonrefundable tax credits include the Child Tax Credit and the Lifetime Learning Credit. Partially Refundable Tax Credits A partially refundable tax credit is a credit that can be used to offset the amount of taxes you owe, and the remainder can be used to receive a refund if the credit amount is greater than the taxes you owe. Some examples of partially refundable tax credits include the American Opportunity Tax Credit and the Earned Income Tax Credit. Fully Refundable Tax Credits A fully refundable tax credit is a credit that can be used to receive a refund if the credit amount is greater than the taxes you owe. This means that even if you don’t owe any taxes, you can still receive a refund for the full amount of the credit. An example of a fully refundable tax credit is the Additional Child Tax Credit. Tax credits can have a significant impact on your tax bill and can help you save money. It’s important to understand the different types of tax credits that are available and how they can benefit you. Keep in mind that tax laws and regulations are subject to change, so it’s always a good idea to consult with a tax professional or refer to the IRS website for the most up-to-date information. In conclusion, tax credits are a valuable tool for reducing your tax liability. The types of tax credits include nonrefundable, partially refundable and fully refundable. Nonrefundable tax credits can be used to offset taxes you owe, partially refundable tax credits can be used to offset taxes you owe and receive a refund for the remainder and fully refundable tax credits can be used to receive a refund even if you don’t owe any taxes. It’s important to understand the different types of tax credits and how they can benefit you to maximize your savings.

Tax Central, Tax Problems

Types of Nonrefundable Tax Credits

/

Nonrefundable tax credits are a valuable tool for reducing your tax liability, but unlike refundable tax credits, these credits can only be used to offset the amount of taxes you owe. They cannot be used to receive a refund if the credit amount is greater than the taxes you owe. In this blog post, we will take a closer look at some of the most common types of nonrefundable tax credits and how they can benefit you. Adoption Tax Credit The Adoption Tax Credit is a nonrefundable tax credit that can help offset the costs of adopting a child. This credit can be used to cover expenses such as adoption fees, court costs, attorney fees, and travel expenses. The credit amount is based on the expenses incurred and the income of the taxpayer. Foreign Tax Credit The Foreign Tax Credit is a nonrefundable tax credit that can be used to offset taxes paid to a foreign country. This credit is intended to prevent double taxation of the same income. Eligible taxpayers can claim the credit on their US tax return for foreign taxes paid on foreign-source income, such as interest, dividends, and capital gains. Saver’s Credit The Saver’s Credit is a nonrefundable tax credit that is intended to encourage low- and moderate-income individuals to save for retirement. The credit is based on the amount of money you contribute to a qualified retirement plan such as a 401(k) or IRA and the income of the taxpayer. Residential Energy Efficient Property Credit The Residential Energy Efficient Property Credit is a nonrefundable tax credit that is intended to encourage individuals to make energy-efficient improvements to their homes. The credit can be claimed for the installation of certain energy-efficient products such as solar water heaters, solar panels, and wind turbines. Credit for the Elderly or the Disabled The Credit for the Elderly or the Disabled is a nonrefundable tax credit that is intended to provide tax relief for taxpayers who are age 65 or older, or who are retired on permanent and total disability. The credit is based on the taxpayer’s income and filing status. Child Tax Credit The Child Tax Credit is a nonrefundable tax credit that can be claimed for each qualifying child under the age of 17. The credit can be worth up to $2,000 per child for tax year 2021. It’s important to note that the tax laws and regulations are subject to change, so it’s always a good idea to consult with a tax professional or refer to the IRS website for the most up-to-date information on the different types of nonrefundable tax credits. In conclusion, nonrefundable tax credits are a valuable tool for reducing your tax liability, but unlike refundable tax credits, these credits can only be used to offset the amount of taxes you owe. Some examples of nonrefundable tax credits include Adoption Tax Credit, Foreign Tax Credit, Saver’s credit, Residential energy efficient property credit, Credit for the Elderly or the Disabled, and Child Tax Credit. It’s important to understand the different types of nonrefundable tax credits and how they can benefit you and consult with a tax professional for more information.

Tax Central

Types of Refundable Tax Credits

/

Refundable tax credits are a valuable tool for those who may not owe taxes or owe very little taxes, but still want to receive a tax refund. These types of credits can be used to receive a refund even if you don’t owe any taxes. In this blog post, we will take a closer look at two of the most common types of refundable tax credits: the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). The Earned Income Tax Credit (EITC) The Earned Income Tax Credit (EITC) is a refundable tax credit designed to help low-income earners and working families. The credit amount varies depending on your income, filing status, and the number of children you have. To qualify for the EITC, you must have earned income from a job or self-employment and meet certain income requirements. The EITC can be worth up to $6,660 for tax year 2021. The Additional Child Tax Credit (ACTC) The Additional Child Tax Credit (ACTC) is a refundable tax credit that is designed to help families with children. It is based on the Child Tax Credit (CTC), but can be claimed in addition to the CTC if the credit amount is greater than the taxes you owe. The ACTC is worth up to $1,410 per child for tax year 2021. Both the EITC and ACTC are refundable tax credits, meaning that if the credit amount is greater than the taxes you owe, you can receive a refund for the difference. These tax credits can provide much-needed financial assistance for low-income families and those with children. It’s important to note that the tax laws and regulations are subject to change, so it’s always a good idea to consult with a tax professional or refer to the IRS website for the most up-to-date information on the Earned Income Tax Credit and Additional Child Tax Credit. In conclusion, refundable tax credits are a valuable tool for those who may not owe taxes or owe very little taxes, but still want to receive a tax refund. Two of the most common types of refundable tax credits are the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). The EITC is designed to help low-income earners and working families and the ACTC is designed to help families with children. It’s important to understand the different types of refundable tax credits and how they can benefit you, and consult with a tax professional for more information.

For Business, Personal Finance, Tax Central

6 Tax deduction things you ignore

/

When it comes to preparing and filing your taxes, it’s easy to overlook certain deductions that could potentially save you money. In this blog post, we’ll take a look at 6 tax deductions that you may be ignoring and how they can benefit you. Home Office Deduction If you use a portion of your home exclusively for business purposes, you may be eligible for the home office deduction. This deduction allows you to deduct a portion of your mortgage interest, property taxes, utilities, and other expenses related to the business use of your home. Health Insurance Premiums If you’re self-employed, you may be able to deduct the cost of your health insurance premiums. This includes the cost of coverage for yourself, your spouse, and your dependents. Medical Expenses If you have high medical expenses, you may be able to deduct a portion of the costs from your taxes. The medical expense deduction is only available if the expenses exceed a certain percentage of your adjusted gross income. Unusual Business Expenses If you’re self-employed, you may be able to deduct expenses that are considered unusual for your business. Examples include the cost of traveling to a trade show, purchasing equipment, or hiring a consultant. Educator Expense Deductions If you’re an educator, you may be able to claim a deduction for certain expenses incurred while teaching. These expenses include books, supplies, equipment, and software that you use in the classroom. The maximum amount you can claim for this deduction is $250 for tax year 2021. Charitable Donations If you make charitable donations, you may be able to claim a tax deduction for the amount donated. To claim the deduction, you’ll need to itemize your deductions on your tax return and have written documentation of your donations. It’s important to note that these deductions are subject to change and may have certain limitations and requirements. Be sure to consult with a tax professional or refer to the IRS website for the most up-to-date information and to understand how these deductions apply to your specific situation. In conclusion, there are many tax deductions that you may be ignoring, such as home office deduction, health insurance premiums, medical expenses, unusual business expenses, educator expense deductions, and charitable donations. Be sure to consult with a tax professional or refer to the IRS website for the most up-to-date information and to understand how these deductions apply to your specific situation. By claiming these deductions, you can reduce your tax liability and keep more money in your pocket.

Tax Central

How does tax help the government?

/

Taxes are the primary source of revenue for governments and are used to fund a wide range of public goods and services, such as education, healthcare, infrastructure, and national defense. But taxes serve more than just a financial purpose, they also play a critical role in shaping a country’s economy and society. Funding public goods and services The primary function of taxes is to raise revenue for governments to fund public goods and services. These include essential services such as education, healthcare, and infrastructure, as well as programs that support the most vulnerable members of society. For example, taxes may be used to fund public schools, hospitals, and highways, as well as programs such as food assistance and housing subsidies. Redistributing wealth Taxes can also be used to redistribute wealth and reduce income inequality. Progressive tax systems, where those with higher incomes pay a higher percentage of taxes, can help to redistribute wealth from the wealthy to the less well-off. This can help to create a more equal society and reduce poverty. Stimulating economic growth Taxes can also be used to stimulate economic growth by providing incentives for businesses and individuals to invest and create jobs. For example, governments may offer tax breaks for businesses that invest in new equipment or hire new employees, or they may reduce taxes on certain types of income to encourage investment. Managing inflation Taxes can also be used to manage inflation by controlling the money supply. Governments can increase or decrease taxes to influence the amount of money in circulation and the level of economic activity. When taxes are increased, it can help to reduce inflation by slowing down economic activity, and when taxes are lowered, it can stimulate economic activity and help to create jobs. Regulating markets Taxes can also be used to regulate markets and promote social goals. For example, governments may impose taxes on certain goods or services to discourage their consumption, such as cigarette taxes to reduce smoking, or carbon taxes to reduce greenhouse gas emissions. It’s important to note that taxes should be designed and implemented in a way that is fair and efficient, and that the revenue raised should be used in a transparent and accountable manner. The government should consult with citizens and stakeholders in setting the tax policy and use the revenue raised to fund necessary public goods and services, promote economic growth and development, and improve the overall well-being of citizens.

Record Keeping Tips, Tax Central

4 Tax season preparation steps

/

Tax season is upon us and it can be a stressful time for many individuals and businesses. However, by taking the time to properly prepare for tax season, you can make the process a lot smoother and ensure that you don’t miss out on any deductions or credits that could help lower your tax bill. Here are four key steps you can take to prepare for tax season: Gather all tax documents and receipts: It’s important to have all of your tax-related documents and receipts in one place so that you can easily reference them when preparing your tax return. This includes items such as W-2s, 1099s, and any other forms that report your income, as well as receipts for expenses that may be deductible. Make a list of deductible expenses: Once you have all of your tax documents and receipts in one place, take the time to review them and make a list of all expenses that may be deductible. This can include things like charitable donations, medical expenses, and business expenses. Be sure to keep accurate records of these expenses, including the date, amount, and purpose, as you will need to provide this information when filing your tax return. Compare your income to your expenses: Once you have a list of your deductible expenses, compare them to your income to see if you can take advantage of any deductions or credits that will help lower the amount of taxes you owe. Some common deductions and credits include the standard deduction, the child tax credit, and the earned income credit. Keep in mind that some deductions and credits have specific requirements that must be met in order to qualify. Check in with a tax professional: Finally, it’s always a good idea to check in with a tax professional to make sure that everything is filed correctly and that you’re taking advantage of all deductions and credits that you qualify for. A tax professional can also help you navigate any complicated tax laws and regulations, and can answer any questions you may have about the tax filing process. In conclusion, by taking the time to properly prepare for tax season, you can make the process a lot smoother and ensure that you don’t miss out on any deductions or credits that could help lower your tax bill. By gathering all tax documents and receipts, making a list of deductible expenses, comparing your income to your expenses, and checking in with a tax professional, you can be well on your way to a successful tax season.

For Business, Record Keeping Tips, Tax Central

Best practices for small business taxes

/

Running a small business can be both exciting and challenging, but one of the most important aspects of it is staying on top of your taxes. Tax laws and regulations can be complex and confusing, so it’s important to have a solid understanding of the best practices for small business taxes. Here are five key steps you can take to ensure that you’re staying compliant and minimizing your tax liability: Hire the right tax professional: One of the most important steps you can take to ensure that your small business taxes are handled correctly is to hire the right tax professional. A good tax professional can help you navigate the complex tax laws and regulations, and can ensure that you’re taking advantage of all deductions and credits that you qualify for. They can also help you plan for your taxes so that you’re not caught off guard at tax time. Keep a separate bank account for your business transactions: It’s important to keep your business finances separate from your personal finances to make it easier to track your income and expenses. By having a separate bank account for your business transactions, you can easily see how much money your business is bringing in and where it’s going. This will also make it easier for your tax professional to prepare your taxes. Collect and save all your receipts: When it comes to small business taxes, it’s important to keep accurate records of all of your income and expenses. This includes saving all of your receipts, invoices, and other documentation related to your business transactions. This will not only make it easier for your tax professional to prepare your taxes, but it will also help you take advantage of all deductions and credits that you qualify for. Correctly classify your business: There are different types of businesses, each with their own set of tax laws and regulations. It’s important to understand the different types of businesses and to classify your business correctly. Your tax professional can help you determine the best classification for your business. Track your expenses and income: One of the most important things you can do to ensure that your small business taxes are handled correctly is to track your expenses and income. By keeping accurate records of your income and expenses, you’ll be able to easily see how much money your business is bringing in and where it’s going. This will also make it easier for your tax professional to prepare your taxes. In conclusion, running a small business can be challenging, but by following the best practices for small business taxes, you can ensure that you’re staying compliant and minimizing your tax liability. By hiring the right tax professional, keeping a separate bank account for your business transactions, collecting and saving all your receipts, correctly classifying your business, and tracking your expenses and income, you’ll be well on your way to a successful tax season.

Personal Finance, Tax Central

5 Ways to protect income from taxes

/

Taxes can be a significant expense for many individuals and businesses, and it’s important to find ways to protect your income from taxes. Here are five strategies that you can use to minimize your tax liability and keep more of your money in your pocket: Invest in a tax-deferred account: One of the most effective ways to protect your income from taxes is to invest in a tax-deferred account, such as an IRA or 401k. These types of accounts allow you to defer paying taxes on the money you put into them until you withdraw it in retirement. This can help you save a significant amount of money on taxes in the short-term, while also helping you save for retirement. Buy municipal bonds: Municipal bonds are a type of bond issued by state or local governments. The interest income from these bonds is generally tax-free at the federal level, and may also be tax-free at the state and local level, depending on where you live. Give to charity: Another way to reduce your tax liability is to make charitable donations. Not only will you be making a positive impact on the community, but you may also be able to claim a charitable contribution deduction on your taxes. Claim all available tax credits and deductions: Tax credits and deductions can help you reduce your tax liability by lowering the amount of income you’re taxed on. Be sure to claim all credits and deductions that you qualify for, such as the child tax credit, the earned income credit, and the standard deduction. Max out retirement accounts: As mentioned before, investing in tax-deferred accounts, such as an IRA or 401k, can help you protect your income from taxes. To maximize the benefits of these accounts, try to contribute as much as you can to them each year, up to the contribution limits. This will not only reduce your tax liability, but it will also help you save for retirement. In conclusion, taxes can be a significant expense, but there are ways to protect your income from taxes. By investing in a tax-deferred account, buying municipal bonds, giving to charity, claiming all available tax credits and deductions and maximizing your retirement accounts, you can reduce your tax liability and keep more of your money in your pocket. It’s important to consult with a tax professional to determine which strategies will work best for your particular situation.

For Business, Tax Central

5 small business tax savings strategies

/

Running a small business can be challenging, and taxes can be a significant expense. However, there are several strategies that small business owners can use to save money on taxes. Here are five tax savings strategies for small businesses: Keep good records: One of the most important things you can do to save money on taxes is to keep accurate and detailed records of your income and expenses. By keeping good records, you’ll be able to take advantage of all deductions and credits that you qualify for, which can help lower your tax bill. Buy equipment for your business instead of renting it: When it comes to buying equipment for your business, it’s generally more tax-efficient to buy it rather than renting it. When you buy equipment, you can take a depreciation deduction on your taxes, which can help lower your tax bill. Take advantage of tax breaks available to small businesses: There are several tax breaks available to small businesses that can help lower your tax bill. These include things like the Small Business Health Care Tax Credit, the Work Opportunity Tax Credit, and the Employer Credit for Paid Family and Medical Leave. Be sure to take advantage of all tax breaks that you qualify for to save money on taxes. Get a business credit card: Another way to save money on taxes is to get a business credit card. Business credit cards often offer rewards and cash back, which can help you save money on taxes. Additionally, business credit cards can help you separate your personal and business expenses, making it easier to track your income and expenses for tax purposes. Pay yourself with money left over after paying all the bills: One of the best ways to save money on taxes is to pay yourself with money that’s left over after paying all the bills. This will help you avoid overpaying taxes, and it will also help you save money for retirement. In conclusion, running a small business can be challenging, and taxes can be a significant expense. However, by keeping good records, buying equipment for your business instead of renting it, taking advantage of tax breaks available to small businesses, getting a business credit card, and paying yourself with money left over after paying all the bills, small business owners can save money on taxes. It’s important to consult with a tax professional to determine which strategies will work best for your particular situation.