IMPORTANT TAX RETURN INFORMATION


Davette Lynne Hrabak, CPA rounds out here four part series about taxes and returns discussing rates, exemptions, and limits; education grants; standard deductions; charitable contributions; and Health Savings Accounts.  Each section is in bold for ease of finding the information you may need.

For a free, no obligation quote, call Davette at 715-339-6638.  Her office is located between the lion statues at 164 South Lake Avenue in Phillips.

2021 TAX YEAR TIP:  QUICK TAX FACTS - RATES, EXEMPTIONS, AND LIMITS

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

Each year the IRS releases and revises various rates, exemptions, and limits, some of which are listed below:

Standard mileage rates are available to taxpayers in certain situations.  The current rates for the filing of your 2021 income tax return are as follows:

Business Standard Mileage Rate:  56 cents per mile

Medical Standard Mileage Rate:  16 cents per mile

Charitable Standard Mileage Rate:  14 cents per mile

Gift Tax Annual Exclusion:  $15,000

Each person’s tax situation is unique.  Sometimes the only deduction available is a standard rate and other times the taxpayer has an option to choose to use standard rates or actual amounts.  The circumstances of which is most appropriate to use must be looked at on a case-by-case basis for each taxpayer; rarely are any two taxpayers’ situations identical.

2021 STUDENT EDUCATIONAL GRANTS CAN BE TAXABLE

Many taxpayers are surprised to learn that some of the money that their children receive from scholarships and grants may be taxable.

It is true that there is a Scholarship and Fellowship Exclusion; however, this is only a partial exclusion based on how the funds are used, and, in order to qualify for that exclusion, the person must be a degree candidate.  The degree candidate must also be a primary or secondary school student, a college undergraduate or graduate student, or a part-time or full-time student at an accredited educational institution that provides a program that is acceptable for full credit towards a bachelor’s or higher degree.  The program that the school offers must be a program of training to prepare students for gainful employment in a recognized occupation.

If the person is not a degree candidate, all amounts received are generally taxable.

If the person is a degree candidate, then only amounts used on tuition fees, books, supplies, and equipment are tax-free.  Any amounts spent on room & board and travel are taxable.  This, at times, causes some confusion among many taxpayers and can result in some students inadvertently doing their tax returns incorrectly.

Scholarship and fellowships include items such as Pell Grants and other Title IV grants that are need-based education grants.

There are, however, additional exceptions to this, including if the scholarship or grant was provided by a tribe subject to the Tribal General Welfare Act.

STANDARD DEDUCTIONS

Almost every year there are changes to the amounts for the standard deduction.  As you probably know, if you do not itemize a tax return, you are entitled to take a standard deduction.  If you are able to itemize, and if your itemized deduction is higher than your standard deduction, then you take your itemized deduction.

The standard deductions for this year are:
Married Filing Joint or Qualified Widow or Widower filing status:  $25,100
Single Filing Status:  $12,550
Head of Household Filing Status:  $18,800
Married Filing Separately Filing Status:  $12,550
Dependent Filing Status:  $1,100

YOU MAY BE ABLE TO TAKE A DEDUCTION FOR CHARITABLE CONTRIBUTIONS EVEN IF YOU ARE UNABLE TO ITEMIZE

Most people are aware that charitable contributions are tax deductible if you are able to itemize and you meet the proper criteria for the deductions.  However, many people do not realize that if you are not able to itemize, you still may be able to deduct your charitable contributions.

The above–the-line deduction is for certain cash donations that were made to public charities.  Therefore, for this deduction, donations of personal property to a charitable organization would not count.  The deduction is limited to $300 per taxpayer, which means if you are filing a married filing jointly return, it is limited to $600 total.

This deduction is only for people that do not itemize.

As with all itemizing, be sure to have and keep proper proof of your donation that you used for your deduction in your records.

HEALTH SAVINGS ACCOUNTS (HSAs)

You may have heard about Health Savings Accounts.  They are a savings account that is set up and used exclusively for paying for qualified medical expenses for the account beneficiary and/or dependents and/or spouse of the beneficiary.

They are a valuable tool to help assist in the costs of individual and family health care.

If you qualify for a Health Savings Account, there are differences in limitations based on self-only or family coverage.

For 2021, some of the limitation cut-offs are as follows:

For Self-only Coverage:
Contribution (deduction) limit:  $3,600
Plan minimum deductible:  $1,400
Plan out-of-pocket limit:  $7,000

For Family Coverage:
Contribution (deduction) limit:  $7,200
Plan minimum deductible:  $2,800
Plan out-of-pocket limit:  $14,000

There is an annual contribution amount increase of $1,000 for anyone who is age 55 or older.

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 715-339-6638.  Her office is located between the lion statues at 164 South Lake Avenue in Phillips.

   
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 715-339-6638 or visit Davette's website.  Follow her Facebook page.
(This post was last modified: 03-07-2022, 05:17 PM by My Northern Wisconsin.)