Week 6

College - American Opportunity Tax Credit (AOTC) & Lifetime Learning Credit (LLC)?

This week we wanted to talk about colleges and the potential credits you may qualify for. Parents as well as Post Grad students please read below as this will help you the most.

The first is the American Opportunity Tax Credit. This is a maximum credit of $2,500. The Modified Adjusted Gross income limit (MAGI) is $80,000 for single filers or $160,000 for joint filers. For a list of criteria to be eligible for AOTC please see link below.

Source: https://www.irs.gov/credits-deductions/individuals/aotc

The second credit is the Lifetime Learning Credit. This credit is unique in that it does not have any time limit. That is you could be in graduate school 20 years later and potentially qualify. The maximum credit is $2,000 per return. The Modified Adjusted Gross income limit (MAGI) is $68,000 for single filers or $136,000 for joint filers. For a list of criteria to be eligible for LLC please see link below.

Source: https://www.irs.gov/credits-deductions/individuals/llc

Know your Options!!!

Any questions feel free to reach out via Akshar@pateltaxaccounting.com or 908-800-2239

Week 5

Tip: Businesses - Car Deductions?

This week we want to bring up the benefits of car purchases used in businesses! Cars used for the purpose of business have always been able to take up to 50% of the car value as a deduction the first year it was put in use. However, thanks to new tax laws passed in 2017 you may be eligible to take up to 100% of the value of a car the first year put into use instead!

Cars purchased/used for business purposes which weigh over 6000 pounds can take the full value of the car as a deduction in the year of purchase. The other important kicker in this is even if you finance the car and didn't buy it outright, you can still take the full purchase price of the car that year!

Ex: Purchased Infiniti QX80 - which is over 6000 pounds

Purchase Price: $65,000

Down payment: $5,000

2020 Tax Deduction - $65,000

Please note this is a temporary benefit put into place until 2022! If you purchase a car under 6000 pounds you can still get the deduction however, it will just be over 5 years or more rather than immediately (as it has been done historically). Know your options! If you have any questions feel free to reach out to Akshar@pateltaxaccounting.com.

Week 3

TIP: Reduce Taxes - How to Set Up Your Business - Understanding Your Options

When creating a business one of the BIGGEST overlooked pieces is the best way to incorporate for tax purposes. 1120s Corporation, 1120 Corporation, LLC, Sole Proprietorship, and 1065 Partnerships are all different types of ways to structure your business here in the United States. Each one of these has its own particular tax benefits depending on the type of business and who is involved.

Below are links to general descriptions of each structure type and a high level overview of potential tax benefits. I HIGHLY recommend speaking to a tax professional before making this decision as this can have a huge impact when it's tax time. If you have any questions regarding what is the best tax type for your business or if you would like to change your current type feel free to reach out to Akshar@pateltaxaccounting.com or call 908-800-2239

Useful Links Below:

https://www.irs.gov/.../small.../business-structures

https://www.entrepreneur.com/article/75118

Week 2

TIP: Reduce Taxes - Car Tax Credits

This week we wanted to switch things up and talk about Car Tax Credits. There are a couple of big benefits to going electric other than skipping that gas bill!

The federal government enacted a tax benefit back in 2010 (still present today) that gives car buyers up to a $7,500 Tax Credit on an electric car. There are two main points you will need to know. The first is this benefit is set to expire at the end of 2022. The second is you can get $7,500 in a tax credit back as long as the automaker you choose has sold less than 200,000 electric cars (not per model but 200k cars total). Once it passes that threshold (ex: Tesla) it begins to phase out until it is no longer there. I’ve added a link below to give you in-depth details. While everyone wants a Tesla there are a lot of new EVs coming out by many car manufacturers including Honda, BMW, Mercedes, Ford, and others before 2022 so if you want to look elsewhere you can.

On top of that, each state has its own rules that also give you additional tax credit back! The best example is in NJ and California. NJ gives back an extra $5,000 as long as the car that was purchased is under $55,000 MSRP. In essence, you can get $12,500 during tax time back alone so it is definitely something to consider! I’ve added another link below that shows if your state has additional electric vehicle tax credits as well.

Useful Links Below:

https://evcharging.enelx.com/resources/federal-and-state-electric-vehicle-incentives?fbclid=IwAR0l5Se_uQ8TdF2-Zer2HRAWsZn64nMSOI0gzdaroLyfpYWFVPytvBWZVNU