Being united in wedded bliss brings a myriad of changes and that extends to your federal income tax return. If you were married by Dec. 31 of the current year, the IRS considers you married for the entire year. The following are some things you need to know, do and be aware of before filing your taxes.

Name Change and Address

You need to ensure that your Social Security card reflects your name change or your return could be rejected and a name change can take weeks to process. Don’t forget to report any change of address to your employer to ensure your address is correct on your W-2 and it arrives in a timely manner. You’ll also need to change your address with the Postal Service.

Standard Deduction

As a married couple, you’re eligible to file jointly and take the standard deduction instead of itemizing. You can choose not to file jointly, but the deduction will be less.

Saving for Retirement

If you or your spouse works while the other stays at home to care for children, and you file a joint return, the working spouse can contribute to the other’s IRA up to a specified amount.

Selling a Home

You may be able to retain more of your profit if you sell a home. Part of the amount may be tax free. To qualify, it must have been your primary residence for 2 of the last 5 years, but the years don’t have to be consecutive.

A Word of Warning

If your spouse has questionable ethics and you can’t trust them to be honest, don’t file a joint return. Filing a joint return makes you equally responsible for any lies, omissions or misrepresentations. Other reasons to file separately is if your spouse has defaulted on a student loan, is in arrears on child support, or owes back taxes. Filing jointly means the IRS can take any refund to which you’re entitled.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

Inflation is making it more difficult for parents to afford the basics of life for their children. Economists estimate it costs parents approximately $20,800 per year to raise one child in 2023. That’s accounting for the cost of food, housing, clothing and childcare so parents can work. That doesn’t count the cost of college or trade school.

It highlights the importance of obtaining every credit and deduction possible when filing your federal income tax return. A tax credit decreases what you owe. A tax deduction decreases your taxable income. Children will need a Social Security card for you to claim those credits and deductions.

Child Tax Credit

This can earn you up to $2,000 for each of your children under the age of 17 if they qualify. The IRS has very specific rules in regard to your income level, filing status, and who qualifies as a dependent.

Credit for Other Dependents

An increasing number of families are intergenerational households. If you’re supporting a child too old to claim on the Child Tax Credit, you may be able to claim them under Other Dependents. Elderly parents living with you may also qualify.

Child and Dependent Care Credit

Paying for childcare so parents can work can cost $300 per week or more. If you qualify, you can receive up to $3,000 to help defray childcare costs for 1 child or $6,000 for 2

Earned Income Tax Credit (EITC)

To claim this, you’ll have to fall within certain income limits according to your adjusted gross income. The amount will vary, depending on the number of your dependents. People without children may also qualify.

American Opportunity Tax Credit

You can recoup a portion of the cost of sending your child to college if you paid for tuition, books or supplies. If you qualify, you can claim the credit for the first 4 years of their college.

Lifetime Learning Credit (LLC)

This can be worth $2,000 if you paid for qualifying expenses. There’s no limit on how many years you can claim it.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

Every year, Congress makes what’s known as inflation adjustments and hands down the changes to the IRS to implement. The adjustment will be about 5.4 percent in 2024, which is smaller than last year’s 7 percent. The IRS has announced changes to tax rules for 2024 as inflation adjustment measures.

The changes will take effect when people file their federal income tax returns in 2025. Several of the changes will be of major interest to the average taxpayer, depending on their individual circumstances. Everyone needs to understand how important it is to claim the appropriate amount of withholding tax.

Standard Deduction

The standard deduction for the 2024 tax year will increase by $750 for those that are single or couples filing separately, by $1,100 for heads of household, and by $1,500 for couples filing jointly.

Tax Brackets

The U.S. has 7 tax brackets. Individuals are taxed at rates of 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent, depending on income. Tax brackets and tax rates will remain the same, but income thresholds will change.

The result is that some people will remain in a lower tax bracket, while others who received a cost-of-living increase could find themselves in a higher tax bracket. An example is married filers. They’ll be able to make up to $94,300, while staying in the 12 percent tax bracket.

Other Changes

There will be some other adjustments that will affect the average taxpayer along with a major change for the wealthy.

• The Earned Income Credit increases to $7,830 for qualifying filers with 3 or more children.
• People with an FSA can contribute up to $3,200
• Those with an HSA can contribute $4,150 for their own coverage or $8,350 for family coverage
• The gift tax exclusion will increase to $18,000 per person in 2024.
• Estates valued at $3.6 million won’t be subject to estate taxes.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

If you’re dreaming of working from home, being your own boss, or owning your own business in the gig economy, think carefully. You need to be aware of some pertinent facts that will significantly affect your financial health and welfare. It can be especially shocking and frustrating when it’s time to file your federal income taxes. Be prepared – you’re going to pay more in taxes in 2025 when you report your 2024 earnings.

You’re Self-Employed

The IRS defines gig workers as self-employed if they earn $400 or more. As such, you must pay employer and employee federal income taxes. That means Social Security, Medicare, and a self-employment tax. The self-employment tax is 15.3 percent of what your gig work earnings, 12.4 percent for Social Security, and 2.9 for Medicare.

You Might be a Gig Worker…

You could be a gig worker and not even realize it. If you do on-demand freelance projects, you’re a gig worker. The realm of gig work encompasses food delivery, driving a rideshare, or walking dogs.

Ways to Reduce the Burden

The first rule as a gig worker is to save every receipt for money you spend in connection with your work, whether you consider it gig work, freelancing, or a side hustle. You can deduct those expenses on your income tax return.

Hire an Accountant

With gig work, your taxes become more complex, complicated, and require more forms. The services of an accountant familiar with gig work and the tax structure is indispensable. He or she can help you find ways to minimize taxes, while maximizing what you keep.

Software and Setting Aside Funds

It can be helpful to use home accounting software, but you have to be diligent about making entries. You’ll need to set aside a portion of your earnings to cover the cost of your taxes when you file, since it’s difficult to know exactly how much you’ll owe. A good rule of thumb is to set aside 30 percent.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!