Are you prepared for tax season?

At A.P. Accounting & Tax Services, we get asked tax questions all the time. Given that tax season is just around the corner, we’ve decided to outline some of the most common questions below.

1. How Can I Lower My Tax Bill?

The most common question that we get asked is how to lower a tax bill. The simplest way to do this is through deductions and credits. Deductions allow you to reduce taxable income which will in turn lead to a reduced bill.

To lower your income, consider contributing to an employer-sponsored retirement plan (if your employer offers one). If not, consider putting money into an IRA (individual retirement account, a HAS (health savings account), or an FSA (flexible spending account).

Another way to lower your tax bill is through credits. Of course, there are standard or itemized deductions that nearly everyone qualifies for. But, if you have dependents you may want to look into the child tax credit, which is worth up to $2,000 for 2023 and 2024.

Self-employed workers and business owners may also have more opportunities to save as they can deduct any contributions made to IRAs, HSAs, and FSAs. Self-employed individuals and business owners may also deduct any costs related to the running and maintenance of the business. So, things like supplies, equipment, and utilities may all qualify.

For students that fall within a certain income bracket, interest on student loans might also qualify as a deduction. The income level varies depending on the year so it Is best to double-check the IRS’s website before claiming the interest or to speak with a tax professional who would be able to verify if you qualify.

2. Is there a Difference between Marginal and Effective Tax Rates?

Because of marginal tax brackets, the more you earn the more you will pay in taxes. Overall, there are several marginal tax brackets with the lowest beginning at 10% on any income earned over $1. The highest tax bracket comes in at 37% on any income above $578,125 for singles and $693,750 for those filing jointly.

Effective tax rates represent the total percentage of taxable income that goes towards income taxes. To get this rate, you will need to determine your taxable income and taxes owed. From there, you will need to divide the total owed by your income to get your rate.

3. Can I Claim Medical Expenses?

The IRS allows you to deduct certain unreimbursed medical expenses that exceed 7.5% of your AGI (adjusted gross income). These expenses can be any type of preventative medical care, surgery costs, dental or vision care, prescription medications, or prescription appliances like glasses or contacts, etc.

The amount that you can deduct for these will depend on your income level and whether you itemize your deductions or not. So, it is best to speak with a professional who can review your expenses and income to determine what will qualify.

4. Should I Itemize or Claim the Standard Deduction?

Another question that we get asked a lot is whether deductions should be itemized or standardized. However, the answer to this is simple. Whichever option will save you more money is the one that you should go with.

In 2023, the standard deduction for single taxpayers was $13,850 and $27,700 for those filing jointly. In 2024, these amounts increased to $14,600 and $29,000. If your itemized deductions are over these amounts it is best to claim using that practice instead of taking the standard rate.

Regardless of which deduction method you choose, we always suggest using the services of a professional for your taxes, like us at A.P. Accounting & Tax Services.

Our team of experts can make sure filing is stress-free, and that you are fully informed of what you owe and what you can save. That way, you can rest assured that you won’t get a huge bill come tax season. If you’d be interested in learning more, give us a call at 407-328-5001.

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