Do taxes complicate you? No problem, the same is the case with so many other people out there. So how do you help yourself and make your tax process easier? Yes, hire a skilled tax accountant Orlando and nearly all your tax troubles will be solved. Along with this, you should try to simplify that complicate taxes even more. There are so many terminologies involved and you must know what they mean. Doing this will help you understand your tax forms and the IRS policies. Needless to say, until you do this, there is no way you are bringing down your taxes.
So here are some of the most common tax terms.
The Adjusted Gross Income or AGI is the amount of income you earn in a complete calendar year. This includes your wages, interest amounts, capital gains and dividends. Please note that the AGI does not include the amounts you contribute to a retirement plan, your business expenses, your moving costs, alimony payments, medical bills and the like. Your chosen tax accountant Orlando can provide you with a complete list.
So when calculating your taxes, the AGI is determined first, and minimizing this is, is a good way to lower your tax bills.
Tax credits are just like any other credit that is available at a general store. Once your tax amount has been estimated, you can deduct the amount of credit from the final value. The resultant answer is what you will have to pay as taxes.
A similar concept to credit is deduction, but there is a main difference between the two. Credits control the amount of taxes you owe whereas deductions control your taxed income. So credit can directly reduce you taxes, and deductions only contribute to reducing them.
Tax deductions are the expenses which the IRS permits you to subtract from your adjusted gross income. The resultant value is your taxable income. Obviously, the lower your taxable income is, the lesser amount of taxes you will have to pay.
Deductions are of two types: standard and itemized. Standard deductions are fixed amounts which every tax payer can use. Every year, the standard deduction changes because it is adjusted for inflation. On the other hand, itemized deductions are those expenses which you bring down your taxable income, and can be utilized only if you meet certain requirements.
You can deduct expenses such as mortgage interest, donations to charity, casualty losses and so on. Ask your chosen tax accountant Orlando more about this. Please note that until you itemize all these expenses on Schedule A, you cannot utilize them.
Exemption is applicable when you have dependents or individuals who rely on your income for basic needs such as your spouse and children. Just as standard deductions, exemptions are also fixed and are subtracted from your AGI.
Once all the exemptions and deductions have been applied to you AGI, you arrive at your taxable income. Taxes are then calculated on this amount by using a specific tax rate.
Tax Credits and Deductions that are Often Overlooked by Orlando Accountants
A tax refund can serve as a welcoming income even if the amount is not that significant. Come February, and so many tax payers are delighted when they get amounts from their refunds. Obviously, if you need to maximize this refund, you will have to avail the services of an accountant Orlando.
The problem is that there are so many credits and deductions that you can utilize to bring down taxes. Their numbers are so high that missing out on one of them will not be a surprise. However, since you will not want this, we present you with some deductions and credits that are often overlooked. Your accountant Orlando can guide you more about these.
Taxes are already very confusing, and when you are self-employed, they become even more complicated. Hiring an accountant Orlando does help but you will still need to pay heed to a lot of things.
Coming back to the point, here are some deductions which you should definitely utilize.
Energy Efficient Improvements
Did you make any energy efficient improvements to your home this year? Not only will this bring down your electricity bills, you can also use it to reduce your taxes. So why not get some new doors, a new roof or maybe insulated windows? Just take note that the maximum amounts you can claim on this are 10% of the repairs, and for windows, the credit should not exceed $200. One more thing to take note of: in your lifetime, you can only claim a maximum credit of $500.
By the way, while doing so, you should have a certification statement from the manufacturers, and only then will the expenses be considered as deductible.
Health Insurance Premiums
If you are a self-employed individual, you cannot use health expenses as a deduction. As for those who are an employee, your health expenses will be deductible only when they are 7.5% or more of your adjusted gross income or AGI.
Thefts, Disasters and Causalities
There are certain when the IRS can be generous with you and this is just one of these. If you have ever been a victim of a natural disaster or had to suffer from a robbery, you may be eligible for a tax credit. Moreover, if you live in an area that has been classified as a federal disaster area, you are definitely eligible for a deduction.
So what are those situations in which you will not be eligible? If you were completely covered by your insurance company, you cannot claim this deduction. If you were partially covered, you may be able to deduct the differences in amounts.
State Sales Taxes
Generally, you pay a state income, file your tax return based on this, and use some of it as a deduction. Now if you live in a state where the sales state taxes are high or where there are no income taxes to be paid, you may be able to use this as a deduction and save increased amounts in taxes. Utilizing the sales taxes that you paid on bigger items will help you even more with this.
If you need more information about our Orlando accounting and tax services, please contact us at 407-502-2400. Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years. Our Orlando accounting and tax firm has its main offices in Kissimmee, FL. Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, Clermont, Davenport, and Hunters Creek, FL. Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin numbers, incorporations, and non profit 501c3 tax exempt status applications.