EZ Tax Solutions, Inc.

The tax code provides several ways to control your tax bill through deductions and credits. Tax deductions allow you to reduce your taxable income, and tax credits allow you to directly reduce your tax liability. When you make income from a job, you can often reduce your taxable income by contributing to an employer-sponsored retirement plan or your own individual retirement account (IRA). You may also have a high deductible health plan through your employer with access to a health savings account (HSA) or flexible spending account (FSA). All of these accounts allow you to contribute pretax dollars to invest or hold in cash for saving or for certain expenses. As a result, these contributions lower your taxable income and save you money on your tax bill. If you have dependents, you may qualify for the child tax credit, a partially refundable credit means to lower the cost of raising a child. This credit, worth up to $2,000 for 2023 and 2024, lowers your tax bill dollar for dollar. For your 2021 tax return, the Child Tax Credit is expanded by the American Rescue Plan raising the per-child credit to $3,600 or $3,000 depending on the age of your child. The credit is also fully refundable for 2021. To get money into the hands of families faster, the IRS will be sending out advance payments of the 2021 Child Tax Credit beginning in July of 2021. For updates and more information, please visit our 2021 Child Tax Credit blog post.

Almost everyone qualifies for the standard deduction or itemized deductions that reduce your taxable income. These are often the largest deductions available to you. Refer to item 6 below for information on which one might be best for you. Self-employed workers and business owners may have more opportunities to save on their tax bills, but employees still have plenty of savings opportunities available. As an employee, you can deduct contributions made to IRAs, HSAs, and FSAs when preparing your Form 1040. For employees, contributions made to your 401(k) or other employer-sponsored retirement plan during the year will not need to be deducted for your tax return. Instead, these dollars have already been taken out of your wages as shown on your Form W-2. Further, you can deduct student loan interest if you meet certain income criteria as well as home mortgage interest, state and local taxes, and more. If you have a side hustle, work as an independent contractor, or own a small business, you can deduct a lot of the costs related to running and maintaining your business. You have access to deductions for your home office, self-employment taxes, supplies, equipment, depreciation, health and business insurance, utilities, and much more.