What are the basic tax definitions when filing your tax return in 2020?

Making sense of tax definitions

New tax payers ask, what are the basic tax definitions when filing your tax return in 2020? Since it depends on where they start doing them, this could get a bit tricky so I will keep it brief. In this 2nd part of the series, you will become familiar with simple tax preparation vocabulary.

Deductions for individuals put you in a lower tax bracket

Deductions for individuals lowers the amount of income you may owe on your taxes. 

Popular deductions for itemizing your tax return

What we recommend is to visit the IRS website and go through their deductions list. Additionally, if you have questions, do not hesitate to reach out to your tax professional or someone on our team.

Here are a few deductions:

• Standard Deductions (2019 Tax Year)
  • Single deduction:
    • Under 65: $12,200
    • Over 65: $13,850
  • Head of Household:
    • Under 65: $18,350
    • Over 65: $20,000
  • Married Filing Jointly:
    • Under 65: $24,400
    • Over 65: $25,700 (one spouse)
    • Over 65: $27,000 (both spouses)
  • Married, Filing Separately deduction:
    • Any age: $5
  •  Qualifying Widow(er):
    • Under 65: $24,400
    • Over 65: $25,700
  • Please go to the standard deduction interview on the IRS website if you have any concerns.
• Medical Deductions:
  • If you paid your expenses above and beyond what your insurance covered; you can itemize these medical expenses in your Schedule A.
• Home Mortgage Interest and Points

Tax Credits for individuals

When you find out your taxable amount that you owe, there are credits that you may receive.

• Nonrefundable tax credits give taxpayers refunds only based on the amount owed to the IRS on a tax return.
• Conversely, Refundable Tax Credits give taxpayers refunds no matter the amount you owe the IRS on a tax return.

Furthermore, there are a few tax credits you should consider this year or next tax season.

• Pay Student Loan Interest
  • If you have student loans, get a credit for paying some of it down each tax year.
• Elderly Tax Credit
  • 65 years old
  • Credit range: $3750 – $7,000 As of 03/14/2020

Exemptions

Each personal taxpayer fills out a W-4 when starting with a company. Moreover, this form provides you the ability to claim dependents on your tax return.

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Each personal taxpayer fills out a W-4 when starting with a company. This form provides you the ability to claim dependents during the year. 

In conclusion; you get a tax credit during the year for the number of dependents you claim during the year. The government takes taxes out of your paycheck based on that. Speak with us or your tax professional to ensure you are making the right choice.

The future of Magnitax and our involvement with taxes

Magnitax.com has partnered with Shngli.com and FreeTaxPrepUSA and other partners to assemble a group of tax advisors to work with business owners in all industries. From tax-preparation, auditing and representation in front of the Internal Revenue Service (IRS), we plan to be there for our clients. Also, if you have any questions, please do not hesitate to reach out to us.