BOSTON (CBS) – Review your tax situation now so you have some idea what tax bracket you will fall into this year and decide whether you want to do the long 1040 or the short 1040EZ.
Do your taxes both ways for it is the only way to figure out what is the better deal for you. If your deductions don’t add up to the standard deduction it’s a no-brainer, file the 1040EZ and get the larger deduction.READ MORE: RFK Bridge Lanes Closed After Police-Involved Shooting, Trooper Struck By Vehicle
The standard deduction for couples filing jointly is $12,200 and for singles it is one-half that at $6,100 for this year.
The highest tax rate this year is 39.6% and that comes into play on any income over $450,000 if you are filing jointly and $400,000 for singles. The lowest tax is 10% for the first $8,925 of income for singles and twice that if you are married filing jointly.
Qualified dividend income and long term capital gains will be taxed at 15% for most and some could qualify for 0% and high earners may pay 20%. In addition, high income taxpayers may have a 3.8% unearned income Medicare Contribution Tax applied to their capital gains and other net investment income.
Some good tax planning would be to gift appreciated stock you are holding to your grandchildren if they are in the lower tax bracket. They will take on your cost basis and owe taxes on the profit they make, but they will be taxed at their rate and not yours.READ MORE: Dr. Fauci Says He 'Would Not Be Surprised' If Omicron COVID Variant Is Already In US
The Kiddie tax will kick in if the kiddo’s investment income is more than $2,000. And the kiddie tax applies to all kids under the age of 19 and full time students under the age of 24.
The American Opportunity Credit was extended thru 2017. This allows you to take a tax creditof up to $2,500 if you have paid at least $4,000 in college tuition for the year. This credit benefits more tax payers than the Hope Credit.
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