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Year End Tax Savings. . . for 2021
December 30, 2021   |   2021 Tax Season, Form 1040, IRS, Itemized Deductions (Schedule A), Medical Expense, Medical Insurance, Medicare, Mileage, Retirement Accounts IRA/401K, Tax Forms, Tax Planning-Business, Taxes

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The year is over tomorrow and taxes were back burnered. . . (no pressure). What to do, don’t want to owe . . . As requested. . .

For individuals:

  1. Pay outstanding medical bills. Keep track of total medical paid (doctor, hospital, labs, prescriptions, medical mileage, medical insurance paid out of pocket etc) for the Federal Medical deduction or the Ohio medical deduction worksheet
  2. Contribute money to your favorite 501c3 Charity.  Can deduct up to $300.00 (Single/Married Filing Separately) or $600.00 (Married Filing Joint) on the front page of the 2021 Form 1040  WITHOUT itemizing (see Line 12b).  If want a larger deduction, see 2021 Form 1040 Schedule A Lines 11-14 instructions
  3. Contribute to a Traditional or Roth Individual Retirement Account or open one with your Favorite Bank or Broker and make a contribution
  4. Max out Health Savings Account and/or 401K Contributions (if have one at work)
  5. If have brokerage account, consider selling under performers, deduct loss on tax return.
  6.  If are close to itemization threshold (12,550 Single/Married Filing Separately or 25,100 Married Filing Joint) prepay real estate taxes and estimated taxes by December 31, 2021 so can itemize. Will save more tax dollars long term if can bunch expenses so can itemize in alternate years.

If budget doesn’t allow the above, track your medical paid out of pocket, medical mileage, chiropractor, labs, eye doctor and prescriptions. If pay health insurance out of pocket add that as well for item #1 above.

For Small Business Owners:

  1. Pay outstanding bills.
  2. Buy extra supplies (be reasonable).
  3.  If have employees, prepare payroll tax reports and pay payroll taxes by December 31, 2021 so can deduct on 2021 Taxes.
  4. If have an accountable plan at work ask employees to submit expenses and process reimbursements by December 31, 2021.
  5. Review Profit & Loss. If budget allows fund employee retirement (e. g. 401K match funds)
  6.  Vehicle expense: if actual, is it recorded in the books? If mileage, do you have a mileage log? Is it up to date?  (.56 per mile for 2021 tax year. It adds up!)
  7. Talk to tax pro about the business use of home deduction. Do you qualify?
  8. Repair/Update or replace equipment. If replacing equipment the equipment must be ready for use on December 31, 2021 to deduct on 2021 taxes.

If none of the above apply to you, talk to your tax pro. . .we’re all in this together. . .

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