Uh oh, tax time is coming soon. Figuring out your taxes is never fun, but you can ease the pain by being ready. Pump up your Tax IQ by getting the skinny on what’s new this year.
You’ve Got Three Extra Days to File Your Taxes
Great news for people who like to put things off! April 15, 2017, falls on a Saturday this year. That means you won’t have to file until Monday, which is April 18.
Standard Deduction Going Up for Head of Household
If you are filing as a head of household, you get more good news. Your standard deduction will go up a bit. No such luck though for singles or for married couples filing separately, whose standard deductions will remain the same.
Filing Early and Claiming a Tax Credit? Your Refund May be Delayed
Ugh! No one wants to have to wait longer for their refund. But a new law, meant to fight fraud, has changed the way the IRS handles some returns this year. Now, if you file early and claim an Earned Income Credit or an Additional Child Tax Credit, the earliest you will receive your refund is February 27th, period..
The Penalty for Not Having Health Insurance Has Increased
For many people who did not have health insurance, the penalty has more than doubled from $325 per adult, for those who didn’t have insurance in 2015, to $605 for those without insurance in 2016. There are also penalties for uninsured children, and the penalties can vary depending on income. The easiest way to figure it out is to use an online ACA tax calculator.
This is a Test. This is Only a Test.
Taxes always seem to get more complicated, right? In another effort to fight fraud, the IRS is adding a long number, called a “verification code” to 50 million W-2 forms this year — the forms employees get that show wages and taxes for the past year.
If you e-file your return, you are supposed to type the code into your tax-preparation software. But not to worry. This is just a test of a new system. So, if you don’t enter the code or if you type it in wrong, you won’t be penalized.
Olympics and Paralympics Medals Are Now Tax-Free
Do you like to dream about winning a gold medal and standing on the podium while the national anthem plays? That fantasy has now become even sweeter. Starting this year, if you win a medal in the Olympics or Paralympics, you won’t have to pay taxes on the value of the medal or on the prize money — but only if your income is less than a million dollars. So it’s best to hold off on landing those multi-million dollar sneaker endorsements if you want to get this tax break!
Good News and Bad News for Freelancers
The good news is that if you are a self-employed freelancer who bought a new computer last year, you are in luck. Before, you had to depreciate the cost of equipment you used in your business, meaning you had to spread out the deduction over time. Starting now, you can deduct the whole purchase price at once.
The slightly bad news is that if you use your car or truck for your business, the amount you can deduct for mileage has decreased slightly.
Some Things Never Change
Deductions may go up or down so keep a pragmatic, can-do attitude about it and weather the fluctuations with a calm head. Prior to doing your taxes, schedule something fun to do for yourself as a reward you can redeem only if you’ve handled it all like the freelance pro that you are. Then, you’ll have incentive to keep yourself in-check and a reward you can look forward to!
Tax Tips for Freelancers: Read These Before You File