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May 3, 2025

Employment, Personal Finance, Tax Central

How the Tax Cuts and Jobs Act Affects Your Taxes

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The Tax Cuts and Jobs Act (TCJA) was passed in December 2017 and made significant changes to the federal tax code. Here are some of the ways that the TCJA may affect your taxes: Changes to tax brackets: The TCJA made changes to the tax brackets and tax rates. For example, the top tax rate was lowered from 39.6% to 37%. Increase in standard deduction: The standard deduction was nearly doubled under the TCJA, meaning that fewer taxpayers will itemize their deductions. For the 2022 tax year, the standard deduction for single filers is $12,950, and for married filing jointly, it’s $25,900. Elimination of personal exemptions: The TCJA eliminated personal exemptions, which were previously $4,300 per person. This means that taxpayers can no longer claim an exemption for themselves, their spouse, or their dependents. Changes to itemized deductions: The TCJA made changes to several itemized deductions, such as limiting the deduction for state and local taxes to $10,000 and eliminating the deduction for unreimbursed employee expenses. Increase in child tax credit: The child tax credit was increased from $1,000 to $2,000 per child under the TCJA. Additionally, the income threshold for the credit was increased, meaning that more taxpayers may be eligible for the credit. Changes to business taxes: The TCJA made significant changes to business taxes, including a reduction in the corporate tax rate from 35% to 21%, a 20% deduction for qualified business income for certain pass-through entities, and changes to the depreciation rules for certain assets. It’s important to note that not all taxpayers will be affected by the TCJA in the same way. The impact of the TCJA on your taxes will depend on your individual circumstances, such as your income level, filing status, and deductions. Consult with a tax professional to determine how the TCJA may affect your taxes and to develop a tax planning strategy.

Employment, For Business, Looking to Invest, Personal Finance, Retirement Planning, Tax Central

The Tax Benefits of Contributing to a Retirement Account

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Contributing to a retirement account is not only important for saving for retirement, but it also provides several tax benefits. Here are some of the tax benefits of contributing to a retirement account: Tax-deferred growth: Most retirement accounts, such as traditional IRAs, 401(k)s, and 403(b)s, offer tax-deferred growth. This means that any investment gains, such as dividends and capital gains, are not taxed until you withdraw the money. Tax-deductible contributions: Contributions to traditional IRAs and certain employer-sponsored retirement plans, such as 401(k)s and 403(b)s, are typically tax-deductible. This means that you can reduce your taxable income by contributing to a retirement account. Tax-free withdrawals: Some retirement accounts, such as Roth IRAs and Roth 401(k)s, offer tax-free withdrawals in retirement. This means that any investment gains, such as dividends and capital gains, are not taxed when you withdraw the money. Lower tax rates in retirement: Since retirement account withdrawals are taxed as ordinary income, retirees may be in a lower tax bracket in retirement than they were during their working years. This can result in lower tax rates on retirement account withdrawals. Catch-up contributions: If you’re age 50 or older, you may be eligible to make catch-up contributions to certain retirement accounts. Catch-up contributions allow you to contribute more to your retirement account and potentially reduce your taxable income. Employer contributions: Many employer-sponsored retirement plans offer employer contributions, such as matching contributions or profit-sharing contributions. These contributions can help boost your retirement savings and potentially reduce your taxable income. Contributing to a retirement account is a smart way to save for retirement and also provides several tax benefits. Make sure to research the different types of retirement accounts available and consult with a tax professional to determine which type of account and contribution strategy is right for you. By taking advantage of the tax benefits of contributing to a retirement account, you can maximize your savings and minimize your tax liability.

Business Life Events, For Business, Record Keeping Tips, Tax Central, Tips for Verticals & Niches

Tax Considerations for Freelancers and Self-Employed Professionals

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If you’re a freelancer or self-employed professional, your tax situation may be more complex than that of a traditional employee. Here are some tax considerations for freelancers and self-employed professionals: Self-employment tax: As a self-employed individual, you’re responsible for paying both the employer and employee portions of Social Security and Medicare taxes, known as the self-employment tax. This tax is calculated as 15.3% of your net self-employment income. Estimated tax payments: Since self-employed individuals don’t have taxes withheld from their paychecks, they may need to make quarterly estimated tax payments to avoid underpayment penalties. Estimated tax payments are due in April, June, September, and January of the following year. Business expenses: Self-employed individuals may be eligible for a variety of tax deductions related to their business, such as home office expenses, equipment and supplies, and travel expenses. Make sure to keep accurate records and consult with a tax professional to determine which deductions you’re eligible for. Retirement plans: Self-employed individuals may also be eligible for special retirement plans, such as a Simplified Employee Pension (SEP) plan or a Solo 401(k) plan. These plans allow you to save for retirement while reducing your taxable income. Tax professional: Consider using tax professional who can help you keep track of income and expenses, calculate estimated taxes, and maximize deductions. Self-employment income limits: If you’re self-employed, you may be subject to additional income limits and phaseouts for certain tax benefits, such as the Earned Income Tax Credit and IRA contributions. Make sure to research these limits and consult with a tax professional if you have questions. Navigating taxes as a freelancer or self-employed professional can be complex, but by staying organized and informed, you can minimize your tax liability and maximize deductions. Consider consulting with a tax professional who specializes in working with self-employed individuals to develop a tax planning strategy that works for you.