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| As a small business owner, understanding tax deductions and tax credits can help maximize your profits. 📈 Tax deductions are expenses that can be subtracted from your taxable income, reducing the amount of taxes you owe. Examples of deductions include business expenses, such as rent 🏢, utilities 💡, and office supplies ✏️. On the other hand, tax credits directly reduce the amount of taxes you owe, dollar for dollar. Examples of tax credits include those for research 🔍 and development, hiring certain employees👔, and investing in renewable energy 🍃. By taking advantage of both deductions and credits, small business owners can lower their tax burden and increase their profits 🤑. |
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| 1. Child tax credit 👶🏻 provides up to $2,000 per child, with $1,500 of the credit potentially being refundable. 2. Child and dependent care credit 🧒🏾 cover a percentage of daycare and similar costs for a child under 13, a spouse or parent unable to care for themselves, or another dependent so you can work. The credit generally covers up to 35% of $3,000 of expenses for one dependent or $6,000 for two or more dependents. 3. American Opportunit 📕 tax credit allows taxpayers to claim up to $2,500 for tuition, books, equipment, and school fees, with the first $2,000 being fully covered and 25% of the next $2,000 also being eligible. This credit does not cover living expenses or transportation. 4. Lifetime learning credit 🤓 allows for a maximum of $2,000 to be claimed, which is 20% of the first $10,000 paid toward tuition and fees. It does not include living expenses or transportation but does cover books and supplies needed for coursework. 5. Student loan interest deduction 👩🏻🎓 allows borrowers to deduct up to $2,500 of interest paid on their student loans from their taxable income. 6. Adoption credit 👨👩👧 covers up to $14,890 in adoption costs per child. The credit begins to decrease at certain income levels and completely phases out if the 2022 modified adjusted gross income exceeds $263,410. 7. Earned income tax credit 🤑 If your Adjusted Gross Income (AGI) is less than $59,000, you may be eligible for the earned income tax credit (EITC), which could get you between $560 and $6,935 depending on your marital status, income, and number of children. 8. Charitable donations deduction 🎁 The IRS allows taxpayers who itemize their deductions to write off the value of their charitable gifts, up to 60% of their adjusted gross income. This includes gifts in cash or property such as clothes or cars. 9. Medical expenses deduction 😷 Qualified, unreimbursed medical expenses that exceed 7.5% of your adjusted gross income for the tax year can be written off. 10. Deduction for state and local taxes 📍 Taxpayers can deduct up to $10,000 ($5,000 if married filing separately) for a combination of property taxes and state and local income taxes or sales taxes. The deduction applies to both property taxes and sales taxes, and the exact amount depends on the taxpayer’s filing status. 11. Mortgage interest deduction 🏠 The mortgage interest tax deduction reduces the federal income tax that qualifying homeowners pay by reducing their taxable income by the amount of mortgage interest they pay, making homeownership more affordable. 12. Gambling loss deduction 🃏 Gambling losses and expenses are deductible only up to the amount of gambling winnings. Therefore, you cannot claim a deduction on $100 spent on lottery tickets unless you win and report at least $100 in winnings as well. You cannot claim more than the amount you have won. 13. IRA contributions deduction 💰 Contributions to a traditional IRA may be tax-deductible, but the amount you can deduct depends on your income and whether you or your spouse is covered by a retirement plan at work. 14. 401(k) contributions deduction 🐷 Contributions to a 401(k) retirement account, which is usually sponsored by employers but can also be opened by self-employed individuals, are not taxed by the IRS if made directly from your paycheck. The contribution limit in 2022 was $20,500 ($27,000 for those aged 50 or older). 15. Saver’s credit 👵🏼 offers a percentage of up to $2,000 ($4,000 if filing jointly) in contributions to retirement plans such as IRA, 401(k), and 403(b). The credit percentage is determined by income and filing status, ranging from 10% to 50%. 16. Health savings account contributions deduction 🏥 are tax-deductible and withdrawals are tax-free when used for qualified medical expenses. 17. Self-employment expenses deduction 👨🏼💼 including freelancers and contractors, have access to valuable tax write-offs. 18. Home office deduction💻 The IRS allows self-employment deductions for expenses related to using part of your home exclusively for business, including rent, utilities, real estate taxes, repairs, maintenance, and other related expenses. 19. Educator expenses deduction 👩🏻🏫 Eligible educators, such as school teachers, can deduct up to $300 spent on classroom supplies in 2022. 20. Solar tax credit ☀️ also known as the “residential clean energy credit,” offers up to 30% of the installation cost of solar energy systems, such as solar water heaters and solar panels. Bonus: Electric vehicle tax credit 🚗 The nonrefundable EV tax credit ranges from $2,500 to $7,500 for tax year 2022. Eligibility depends on the vehicle’s weight, the manufacturer, and whether you own the car. For the tax year 2023, the credit is expanded and includes used vehicles. |
| Our financial management course is the perfect opportunity for you to discover a range of deductions and learn how to apply for them. With our expert guidance, you’ll be equipped with the knowledge and skills to take control of your finances and maximize your savings. |