TAX CREDITS AND WHAT YOU NEED TO KNOW


TAX CREDITS AND WHAT YOU NEED TO KNOW
By:  Davette Lynne Hrabak, CPA, CFE, CBM, ATA, ATP, ABA, ECS, CGMA, https://www.DavetteLynneHrabak.com 
“When it comes to taxes, save the lion’s share; enter between the lions to get this special care.”

There are a number of credits and deductions available to taxpayers.  The following four sections, (with each heading in bold for ease of reference), focus on tax credits, including the information you should bring to your tax preparer, the Earned Income Credit (sometimes available even if there are no qualifying children), the Homestead Credit, and a summary of many of the credits that are available.

WHEN IN DOUBT, BRING IT IN AND BRING IT UP
There are so many credits and deductions available to taxpayers; many which individual or business taxpayers may not be aware of.  Each person’s individual tax situation is unique.  An individual that is lower income, someone who has kids, a person who owns and runs a business or a rental, or someone who has a combination of factors on their returns each have unique needs and unique deductions and credits.

It is virtually impossible for an individual to know what all is deductible and what is not on their own.  Therefore, when you bring your items in to be prepared, do not hesitate to talk to your CPA.  Mention any questions that you have and discuss what all has gone on in your year financially.  Many times these conversations open a person up to finding out that they have more deductions and credits available to them than they thought.  Remember there is no such thing as a stupid question. 

Sometimes these helpful conversations can even lead to planning for the future.  For example, maybe you have an item that would have been deductible had you taken certain steps in documenting it.  The discussion would lead to letting you know what you can do for the following year to make next year’s taxes more bearable.

If you think you have an item that could be deductible, bring it up and ask about it. The worst thing that could happen in bringing it up is that you find out it is not deductible.  The best thing is that you find out it is deductible or it sparks additional questions that could lead to something else that may help you in your own individual tax situation.

Bring your prior year return in with you so it can be looked over.  Having a thought-provoking discussion and the prior year return available can go far in making sure things have been done the way that they should have been, and, if an issue is found, the best possible course of action can be discussed. 

In my practice, I have found new clients coming in that did not realize the deductions and credits that they have missed in prior years’ returns.  Many were surprised that some of them can still be claimed without amending a return, (for example, a missed Homestead Credit in a prior year), or via amending a return if needed for some items that can only be corrected in that manner. 

Remember, if you have already filed but realize that you could have had a credit or deduction that you missed, it is not too late; you can always amend your return.  If you need more information or believe you could qualify for them, I would be happy to give you a free quote on the preparation of your return.

When the right tax and financial advice is essential, talk to someone with an unmatched level of knowledge, experience, and education.  A CPA understands the business of taxes and finance and can provide trusted advice and services during the tax season and throughout the calendar year.

For a free, no obligation quote, call Davette at <a href="tel:715-339-6638">715-339-6638</a>.  Her office is located between the lion statues at 164 South Lake Avenue in Phillips.

THE 2021 TAX YEAR EARNED INCOME TAX CREDIT:  IN SOME CASES, EVEN IF THERE ARE NO QUALIFYING CHILDREN

The Earned Income Tax Credit is a credit that is available to many taxpayers.  It is based on a person’s income and the number of qualifying children that they have.  However, many people do not realize that if a taxpayer’s income level falls within certain parameters, then a person whom does not have any qualifying children can qualify for the credit if all criteria are met.

The Earned Income Tax Credit is a complicated credit that has many rules and adjustments to a taxpayer’s income but it is an often used credit and provides a refund to many people, even in cases where the taxpayer has not had any federal or state withholding taken out of their pay.  It is part of a group of credits which are called refundable credits, which basically means that a taxpayer can get back more than what they had withheld from their paychecks. 

The maximum Earned Income Credit amounts available to taxpayers is dependent on whether or not the taxpayer has children, and, if they have children, the number of children they have.

If a taxpayer has no children, the maximum credit that they could qualify for is $1,502.
If a taxpayer has one child, the maximum credit that they could qualify for is $3,618.
If a taxpayer has two children, the maximum credit that they could qualify for is $5,980.
If a taxpayer has more than two children, the maximum credit that they could qualify for is $6,728.

Wisconsin has a Wisconsin Earned Income Credit which provides additional amounts based on individual taxpayer facts and circumstances.

For a free, no obligation quote, call Davette at <a href="tel:715-339-6638">715-339-6638</a>.  Her office is located between the lion statues at 164 South Lake Avenue in Phillips.

COULD YOU BE OVER-LOOKING THE HOMESTEAD CREDIT?

Wisconsin has a credit that is known as the Homestead Credit.  If you own a home or rent you may be eligible to obtain a refund even if you are not otherwise required to file a tax return.

Below is a basic summary of the qualifications for a taxpayer to be eligible for the Wisconsin Homestead Credit.  If you fall into the basic summary, then it would be in your best interest to look further into the credit to ensure you qualify for it, as, if you do, it is a very rewarding credit. 

The Wisconsin Homestead Credit basic qualifications are as follows:

The property that you occupied and owned or rented, meaning your home, apartment, or other dwelling, must be subject to Wisconsin property taxes in 2021.
You must be a legal resident of Wisconsin for the entire 2021 year.
By December 31, 2021 you must be 18 years of age or older.
Your household income, based on a formula used for the credit, must be less than $24,680 for 2021.

You must meet one of the following conditions:  A. During 2020, you or your spouse, if you were married, must have positive earned income during the year. B. You or your spouse, if you are married, are disabled.  C.  You or your spouse, if you are married, are at least 62 years of age or older by the end of 2021.

If under 62, you cannot be claimed as a dependent for the year on someone else’s federal tax return.

You and your spouse, if married, will not claim the Farmland Preservation Credit for 2020 or the Veterans and Surviving Spouse’s Property Tax Credit based on your 2020 property taxes.

You also cannot claim the credit if you lived for the entire year in housing that is exempt from property taxes.

At the time of filing, you cannot live in a nursing home or receive Title XIX medical assistance.

You cannot file a claim on behalf of a person after his or her death.

You cannot have received Wisconsin Works (W2) payments of any amount or county relief payments of $400 or more for all 12 months of 2021.

The Homestead Credit is a very complicated credit which has a lot of modifications to the taxpayer’s income; however, it is also a credit that is very helpful to Wisconsin residents and one that is overlooked by many taxpayers who mistakenly think that just because they are not required to file a return, that they then should not file one. 

For a free, no obligation quote, call Davette at <a href="tel:715-339-6638">715-339-6638</a>.  Her office is located between the lion statues at 164 South Lake Avenue in Phillips.

ARE YOU GETTING ALL THE CREDITS YOU QUALIFY FOR?  A SUMMARY OF TAX CREDITS FOR 2021

There are a variety of credits available for the 2021 tax year.  Of course, each has its own criteria and limitations.  However, if you qualify for any of them, it will make quite a difference on your tax return.  The following is a list of a number of the credits available and a brief summary of what they encompass.

The Additional Child Tax Credit:  It is for taxpayers who do not claim the full $3,000 tax credit for each child due to circumstances on their returns and who have one or more qualifying children.

Adoption Expense:  For a child who is adopted legally who is under age 18 or for the adoption of a person that is incapacitated or special needs (regardless of age).  However, this credit has a phase out for Modified Adjusted Gross Income from $216,000 to $256,660.

Child and Dependent Care Credit:  Expenses for care of dependent(s) whom are under the age of 13 or incapacitated that will allow a taxpayer to work or to look for work.

Child:  If a taxpayer has a qualifying child under the age of 18.

Earned Income:  Taxpayers with or without qualifying children who meet various income and other qualifications.

Education, American Opportunity:  For qualified higher education expenses for up to four years of qualified higher education.

Education, Lifetime Learning:  For qualified postsecondary education and other courses that are to acquire or improve job skills.

Elderly or Disabled:  Low-income taxpayers age 65 or older or permanently and totally disabled.

Federal Tax Paid on Fuels:  Fuels which are used on a farm for farming purposes or fuels for off-highway business use and other qualified uses.

Foreign Tax:  Income taxes that are paid to a foreign country or a U.S. possession on income that is subject to U.S. federal income tax.

Minimum Tax:  If you are subject to Alternative Minimum Tax (AMT), this is a credit allowed against regular tax for part of the AMT paid and it is attributable to deferral items.

Mortgage Interest:  A portion of interest expense paid by home buyers who have been issued a government mortgage credit certificate.

Other dependents:  A credit allowed for qualifying dependents that are not qualifying children.

Personal (Non-business) Energy Property:  Homeowners who install certain energy saving improvements, such as insulation, doors, windows, heat pumps, etc.

Premium Assistance:  This is for certain taxpayers who enroll or whose family member enrolls in a qualified health plan, which needs to be one that is offered in the Marketplace, meaning the health insurance exchange.

Recovery Rebate:  A reconciliation of a taxpayer’s economic impact payment that was received due to the COVID -19 pandemic with the taxpayer’s allowable recovery rebate credit on their 2021 return.

Residential Energy Efficient Property:  This credit is for property that is installed on a taxpayer’s residence for items such as qualified solar electric, qualified solar water heating property, qualified small wind energy, or a qualified geothermal heat pump, fuel cell, and biomass fuel.

Retirement Saver’s:  This is for people who make retirement plan contributions based on income level. 

For a free, no obligation quote, call Davette at <a href="tel:715-339-6638">715-339-6638</a>.  Her office is located between the lion statues at 164 South Lake Avenue in Phillips.

   
SUPPORT LOCAL BUSINESSES - SHOP PRICE COUNTY FIRST:  Davette Lynne Hrabak, CPA, located at 164 South Lake Avenue in Phillips, specializes in tax return preparation, business start-up services, consulting, bookkeeping, payroll, and all your accounting needs.  Call <a href="tel:715-339-6638">715-339-6638</a> or visit <u><a href="https://www.DavetteLynneHrabak.com" target="_blank">Davette's website</a></u>.  Follow her <u><a href="https://www.facebook.com/davettelynnehrabak" target="_blank">Facebook page</a></u>.
(This post was last modified: 02-17-2022, 04:26 AM by My Northern Wisconsin.)

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TAX CREDITS AND WHAT YOU NEED TO KNOW - by My Northern Wisconsin - 02-17-2022, 04:20 AM