PITTSBURGH (KDKA) – With a few days to go into this calendar year, it is not yet too late to check your tax situation.
You could make changes in 2021 that could affect your tax status.
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“Absolutely not too late to take action,” said Carol Macphail, professor at Robert Morris University.
Blame the pandemic and all the changes in law that Members of Congress and Presidents Donald Trump and Joe Biden have enacted over the past two years.
Even certified public accountants can’t keep up.
“There are so many changes this year,” CPA Christopher Cuddy told KDKA editor Jon Delano on Monday. “I just attended two eight-hour seminars and the booklet was 1,100 pages long, just on tax law changes.”
But the basic rule remains the same: if you want to pay less tax in 2021, increase your allowable deductions – and, if possible, defer collecting income like bonuses until after December 31.
“Some companies offer this option,” Cuddy said.
When it comes to deductions, the easiest for everyone, even those who don’t file a detailed income tax return, is to donate to a legitimate charity, says Carol MacPhail, professor at Robert Morris University. .
“So on a single return, $ 300 as a deduction from adjusted gross income, even if you don’t itemize, and on a joint return, it would be $ 600,” MacPhail said.
Speeding up your deductions is another tip. Pay this week for things that are deductible that could be paid next month like January mortgage interest or local property taxes. Or pay your child’s tuition or your own course fees this week to improve your skills.
“Let’s say you have a child in college or you take a course yourself at a qualified educational institution. As long as you can make that payment by December 31, credit is still available, ”Cuddy said.
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This is called the Lifetime Learning Credit and can give you up to $ 2,000.
When thinking about your tax situation, MacPhail recommends it before you act.
“The main thing people need before taking action is what tax bracket they are in, both for the current year and in what bracket they expect next year. . “
There are seven tax brackets ranging from 10% to 37%, and you want to avoid being bumped into a higher bracket if you can. Donating to charities can help, as it lowers your adjusted gross income.
“It could be done by check. The date of sending is considered the date of the contribution, but it can also be done by credit card, ”said Macphail.
For those detailing, another possible deduction is your January 2022 mortgage interest payment if you pay it this week, and if you have a property tax bill from your municipality or school district, pay it this week to claim the total deduction on your return.
Another piece of advice, says Cuddy, if you’ve lost money on the stock market this year, that loss could offset some of your income.
“If your losses exceed $ 3,000, you get a deduction of $ 3,000 on your tax return, and the remaining amount will carry forward the following year,” Cuddy said.
And Cuddy has another tip for small business owners who lease commercial facilities. Prepay part of your 2022 rent this week if you want to deduct it in 2021.
Finally, now is not a bad time to anticipate.
“It’s also a good time to take stock. What will your W-2 look like next year? And maybe now is the time to adjust your deduction, ”Macphail said.
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If the government withholds too much of your money, you could get a bigger refund a year later. But it’s also money that you don’t have to spend or invest during the year.