Some Things You Should Know About Your Taxes
Taxes play an important role for everyone. There are too many people who lose money on taxes because they try to do their taxes on their own and miss out on important deductions. Hiring a CPA is one of the best ways to ensure that you get the best deal on your taxes because they understand all of the deductions and credits that you can get. Here are some things that you should know about your taxes.
What Is The Difference Between Deductions and Credits?
There are too many people who don't fully understand the difference between a deduction and credit. First, it is important that you understand the tax bracket. How much money your earn determines how much you can be taxed. So if you make a lot of money, you will pay more in taxes than the person who didn't pay much. Deductions help to change the amount that you can be taxed. So for example, you might be in a bracket where you could be taxed up to $10,000. But with each deduction, it lowers the amount.
A credit is a little different; a credit is money that is given to you rather than it being deducted from an amount that you can be owed. You can get a credit for $2,000 an just get that money back in a tax return. Credits are separate from deductions and are treated differently.
What Are Some Of the Credits And Deductions You Can Take?
There are many credits and deductions, and if you aren't familiar with them, it is easy to miss out on these opportunities. For instance, you can take a credit if you are a college student and are paying tuition. You can get an earned income credit if you are working but are still falling in the lowest tax bracket. You can also get energy credits if you install solar panels or drive certain cars. These credits change from year to year, so it is important to stay updated on what credits are available each year.
There are far more deductions than credits. If you are self-employed, if you moved for work, if you have children can all qualify you for deductions, and so many more things can affect how much you will pay in taxes.
As you can see, taxes are very confusing, which is why hiring an accountant to do it for you is the best way to ensure that you don't overpay in taxes. For more information and help, contact an accounting firm in your area, such as Carmines Robbins & Company PLC.