Jennifer L. Carr, CPA

Tax & Accounting Services

Tax Planning Tips

Health Savings Accounts (HSA) - an HSA is only available to you if you have High Deductible Health Insurance Plan (HDHP). An HSA allows you to deposit funds up to $3,550 for a single plan or $7,100 for a family plan in 2021. There are many benefits to HSA’s.

· The contributions aren’t subject to federal income tax.

· Contributions can be made up until April 15th following the tax year end.

· Unspent money rolls over at year end and available for future health expenses.

· Can be used to cover out of pocket medical expenses.

401(k) - A great tax savings vehicle is the 401(k) plan. If your employer offers a 401(k) plan, consider making contributions. In 2021 you can contribute up to $19,500 or $26,000 if you are over 50 to your 401(k). By contributing you are shielding your contributions from income tax in the current year. Some employers will match contributions up to a certain percent. If they do, you would be saving on taxes and boosting your retirement by the employer contribution as well. The fund grows tax free until you withdraw the funds, at which time your withdrawal is taxed at your current tax rate.

Qualified Charitable Distributions (QCD) Qualified charitable distributions can be used as an above-the-line charitable deduction, if done properly. This deduction is available even if you don’t itemize. A taxpayer can distribute up to $100,000 each year from their IRA if they are over age 70 ½. The distributions must be made directly to a 501(C)3 charity. It is not limited to your Required Minimum Distribution (RMD) for the year. However, you cannot double count the deduction and take the same dollars as an itemized deduction. This provision is particularly beneficial to taxpayers who are charitably inclined but do not itemize their deductions.

$300/$600 Charitable Donation, 2021 – for 2021, cash charitable contributions of up to $300 for a single taxpayer or $600 for a joint return can be taken even if you don’t itemize. Keep track of all charitable donations to take advantage of this tax deduction. Non-cash donations are not eligible for this deduction.

Student Loans Paid by Employer Employers can make tax- free student loan payments up to $5,250 per employee after March 27, 2020 through December 31, 2025. Both Federal and private loans are eligible. Employers and employees save on federal payroll taxes. Employees save on federal income taxes. This is a great way to get those student loans paid down.

Identity Protection PIN (IP PIN) Starting in 2021, you can voluntarily opt into the IP Pin program as a proactive way to protect yourself from tax related identity theft. In order to opt in you must pass a rigorous identity verification process. You can apply for the IP Pin online at IP Pins are valid for one calendar year. You must obtain one each year. Once you have been given an IP Pin, you cannot efile your tax return without it.