The law allows you to deduct up to 100% of your adjusted gross income (AGI), which is your total income minus other deductions you’ve already taken, in qualified charitable donations-but only if you plan to itemize your deductions. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended two charitable giving changes enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Here are some deductions and credits you might be able to claim on your 2021 or 2022 tax return: 1. Score! If it’s a nonrefundable credit, your tax bill will be reduced to zero, but you won’t get a refund. If a credit is greater than the amount you owe and it’s a refundable credit, the difference is paid to you as a refund. Tax credits, on the other hand, are dollar amounts actually subtracted from your tax bill, and there are two types: refundable and nonrefundable. Some deductions are only available if you itemize your deductions, while others are still available even if you decide to take the standard deduction. Tax deductions help lower the amount of your income that can actually be taxed. Both help you keep more money in your pocket instead of Uncle Sam’s, but in slightly different ways. The closest things to magic words when it comes to taxes are deductions and credits. Tax Deductions and Credits to Consider for Tax Season 20
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You might want to talk to a tax pro if you’ve got a complicated situation with lots of possible deductions.
Not sure whether you want to take the standard deduction or itemize? Everyone’s situation is different, so there’s no one-size-fits-all answer. Itemizing is more of a hassle, but it’s worth it if your itemized deductions exceed the amount of the standard deduction.įor tax years 20, the standard deduction went up slightly to adjust for inflation. When you pay taxes, you have the option of taking the standard deduction or itemizing your deductions (calculating your deductions one by one). 2 2021 Marginal Income Tax Rates and BracketsĢ022 Marginal Income Tax Rates and Brackets 1 2022 tax brackets also look a little different. Basically, the brackets have been adjusted by a few hundred dollars since 2020 to account for inflation. (We break it down in the chart below.)įor the 2021 tax year, the tax rates are the same-but there are some slight changes to the brackets. Instead, part of your income is taxed at 10%, another part at 12%, and the last part at 22%. But that doesn’t mean your tax rate is a flat 22%. Connect with a RamseyTrusted tax advisor.įor example, if you’re single and your income is $75,000, then you’re in the 22% tax bracket. Here’s a refresher on how income brackets and tax rates work: Your tax rate (the percentage of your income you pay in taxes) is based on what tax bracket (income range) you’re in. Income Brackets and Rates for the 20 Tax Seasons
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We’ll dig into both of those changes, plus a few more, a little later. Some new things this year included an increase in charitable giving deductions (if you don’t itemize) and the expanded Child Tax Credit (parents, you noticed some extra cash in your bank account in 2021, right?). The coronavirus threw several monkey wrenches into the 2021 tax season-including giving all of us procrastinators an extra month to file! But the 2022 (and 2023) tax season is back to business as usual.
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