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What can i use for tax write offs

what can i use for tax write offs

The term "write off" is a pretty broad term when referring to tax returns.

Terminology that is more accurate would be terms like deductions, adjustments, credits.

A child that qualifies as a dependent gives the taxpayer the tax benefit of a dependent exemption.

That same child may qualify the taxpayer to be able to file as head of household (this is more advantageous than filing single or married filing separate).

That same child may also qualify the taxpayer to take a percentage of the cost of expenses for child care that enables the parent to work. All expenses of child care are not a write off - rather, a percentage is (calculate that on Form 2441).

That same child may entitle the taxpayer the ability to claim the child tax credit and/or the additional child tax credit. One is a non-refundable credit the other is a refundable credit.

Additionally, that same child may be a qualifying child to the taxpayer for purposes of claiming the earned income tax credit (this is a refundable credit).

If a taxpayer is able to file Schedule A (Itemized Deductions) then certain deductions with respect to the child may be allowed. For example, medical, dental, optometry, prescriptions drugs, hospital care, medical health insurance premiums, etc. can be claimed (the amount is limited to a figure greater than 7 1/2% of the taxpayer's adjusted gross income).

When the child is older and in school the cost of educating that child could be translated into an education credit to the taxpayer. Currently, there are at least four such credits available (Lifetime Learning Credit, Hope Credit, American Opportunity Credit, and Tuition deduction).

As an independent

contractor the expenses you can deduct depend on the nature of your business. The Internal Revenue Service applies tax law to such things and the one primary consideration is that expenses must be "ordinary and necessary." By the term ordinary the expenses must be a usual expense others in that business might experience. Also the term necessary means that, even though ordinary, it must be a necessary expense for that taxpayer.

Expenses typically seen on the report of self employment (See Schedule C) include: advertising, travel, office supplies, taxes and licenses, legal and professional fees, repairs and maintenance, real estate taxes, interest, equipment, depreciation, meals and entertainment, gifts to clients, etc.

Filing a Schedule C and applying every benefit to your tax situation is important. However, one thing I learned long ago was "you get what you pay for. " Preparing a tax return correctly is more than just "fingers on a keyboard. " It is a fact of life in this country that our tax code is complex, difficult for the best of us, and perhaps even unfair and burdensome!

Even when the Congress enacted some years the Tax Simplification Act (oxymoron terminology!) the law brought into play an additional 500 rules to the tax industry. All paid preparers are not equal. They may be the most expensive but miss one form on your tax return that might cost $50 for a preparer to complete and see where the tradeoff is at that point. IF that missed form cost you $2,000 in a credit you should have claimed would $50 to get it done correctly be worth the investment? Only you can answer that question.

Carl · 5 years ago

Category: Taxes

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