If you are getting subsidized health insurance through the Federal health insurance exchange then you likely can receive more subsidy due to a recent law change. In the past, you could receive NO subsidy if your income exceeded 400% of the Federal Poverty Level. Now, there is no bright-line phaseout and you will always receive a subsidy to keep you from paying more than 8.5% of your income towards health insurance. If you need any clarification on how this impacts your tax return then please call us.
Don’t Overpay Tax on Early Retirement Distributions
If you have to get your hands on IRA or 401K money before age 59 ½, then usually you have to pay a 10% penalty. You might be able to avoid this penalty if your withdrawal is to pay for large medical bills, college expenses, the birth or adoption of a child, a first-time home purchase (withdrawal limited to $10K), or is related to a disability. Furthermore, some of these exceptions only apply to IRA withdrawals. For example, if you are purchasing your first home, a $10K withdrawal from your 401K to fund it will be subject to a 10% penalty, but a $10K withdrawal from an IRA won’t be. Solution: Roll $10K of funds from your 401K to your IRA, and then withdraw the funds from the IRA to help with your house down payment.
Save $1,000 in 2022 or $1,500 in 2023 if you Have a Child in College or Private K-12 School
If you have a child in college or private K-12 school, then take advantage of the 20% Indiana College Choice 529 credit on your Indiana tax return. The credit is 20% of your annual contribution with a max annual credit of $1K in 2022 and $1.5K in 2023. You don’t need to pay funds directly from the 529 to the school. If you would rather pay for school expenses from your personal account, then contribute funds to the 529 to get the credit and then transfer those funds back to your personal account as a reimbursement. To take advantage of this, the funds need to be deposited into the 529 by 12/31 of the year for which you want the credit.
For Those over 72 who Donate to Charity
If you are over age 72 then you are forced to withdrawal money from your Traditional IRA each year and include that amount in your taxable income. Most retirees don’t itemize since their itemized deductions (state and local taxes, mortgage interest, and donations) don’t exceed the $28,700 standard deduction – thus their donations don’t save them any tax. The solution: If you donate to charity directly from your IRA, then you don’t have to include that donated amount as income on your tax return…so in a round-about way, you get to deduct that donation (i.e., your taxable income doesn’t include the amount you donated to charity directly from your IRA). Even though the required minimum distribution age is 72, you can start using this strategy when you reach age 70.5.
If you have a high-deductible health insurance plan that covers your family and you have a child on that health plan who is under age 26 and not a dependent (thus, the child is likely age 22-25), then you can contribute the family maximum to your own HSA and since that non-dependent child (likely aged 22-25) is also on a family high-deductible health insurance plan, that child can contribute $7,300 to their own HSA account.
Obamacare Family Glitch Fixed
When the ACA/Obamacare was drafted, approximately 6M families who didn’t have access to affordable health insurance through work weren’t allowed access to healthcare exchange subsidies. If a spouse was offered affordable self-only health insurance through their job, then the family was barred from getting exchange subsidies even though that employer didn’t offer affordable family health insurance coverage. This has been fixed and will allow these families the chance to get health insurance subsidies when open enrollment begins on healthcare.gov on November 1st. We have encountered many families who were hurt by this “glitch” and this is welcome news to them.
Indiana’s Automatic Taxpayer Refund
On August 5, Governor Eric Holcomb signed legislation authorizing a new $200 automatic taxpayer refund for qualifying individuals, $400 for joint filers.
If you are still waiting on your original $125 refund from Indiana via check payment. You will receive that amount along with the additional $200.
If you received the initial $125 via direct deposit, you will receive the $200 ($400 joint filers) via direct deposit again. Indiana’s goal is to send these out mid to late August.
You are eligible for the $200 refund as long as your tax return for 2020 was filed by 1/3/22 or earlier & your 2021 tax return was filed by 4/18/22 with a direct deposit account listed.
Keep an eye on your bank accounts and your mailbox! For further questions, please reach out to us!
Indiana is Giving Me $125
Am I eligible?
You will receive an Automatic Taxpayer Refund if you filed an Indiana resident tax return for the 2020 tax year with postmark date of Jan. 3, 2022, or earlier. An Indiana resident tax return means you filed your state taxes using one of the following:
- Form IT-40, Indiana Full-Year Resident Individual Income Tax Return.
- Form IT-40PNR, Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return, if you were married and filed jointly AND you were an Indiana resident for the entire year (2020).
- Form SC-40, Unified Tax Credit for the Elderly AND you resided in Indiana for more than six months in 2020.
How will I receive my Automatic Taxpayer Refund?
How you receive your Automatic Taxpayer Refund depends on information contained in your 2021 Indiana Individual Income Tax return. Your Automatic Taxpayer Refund is separate from other payments or refunds you may receive from the state.
You should receive your Automatic Taxpayer Refund by direct deposit if:
- You filed an Indiana resident tax return for 2020 before Jan. 3, 2022; and
- Filed a 2021 Indiana resident tax return by April 18, 2022; and
- Listed direct deposit checking or savings account information for your 2021 Indiana Income Tax refund.
One-time direct deposits of $125 will arrive in bank accounts beginning in May and continue through mid-summer.
Currently, the Auditor of State plans to mail Automatic Taxpayer Refund checks in late summer. * You will receive a check from the Auditor of State if:
- You do not meet the requirements for direct deposit (see above); or
- You filed for an extension of time to pay on your 2021 Indiana resident tax return; or
- You included directed deposit information for an account associated with refund advance loans or similar arrangements; or
- Your Automatic Taxpayer Refund could not be otherwise deposited directly into your bank account.
*This timeline is dependent on supply-chain issues affecting the paper industry and is subject to change.
Whenever possible, one refund of $250 will be issued by direct deposit or check for married couples filing jointly when both spouses are eligible for the Automatic Taxpayer Refund.
You should allow until Sept. 1 to receive your Automatic Taxpayer Refund.
New Federal Tax Credit for EV Charging Stations:
If you purchased an electric vehicle recharging station for your home, then you can get a Federal tax credit of 30% of the cost. The maximum credit is $1,000. This benefit is available on your 2018-2021 individual tax returns. If you didn’t take this on a previously-filed-return, then ask us to amend that return to take this credit.
Have You Recently Made Energy-Efficient Improvements to Your Home?
Do You Provide Your Employees with Paid Family and Medical Leave?
Eligible employers are allowed a credit of 12.5% of the amount of wages paid to employees who are on family and medical leave if the employer pays at least 50% of the wages normally paid to the employee while that employee is on leave. So, if you have a salaried-employee who has a new child or a sick spouse, and continue their salary during their absence, the government wants to give you money. There are plan-rules that need to be followed before taking the credit – ask us for guidance.
Have Employees with Student Loans?
An employer may contribute up to $5,250 annually toward an employee’s student loans, and the payment will be excluded from the employee’s W-2 wages. While employers can’t discriminate in favor of highly-compensated employees when providing this benefit, they can provide it only to certain level or geographies of employees if desired. Utilizing this benefit will save the employee income tax and the employer FICA tax. Do you have any employees with student loans? Instead of giving them a raise, tell them that you will now pay their student loans for them – effectively giving that employee a raise without causing the employee to pay tax on that raise.
Had Self-Employed Income AND Covid in 2021?
If you had a profitable self-employed business and couldn’t work in 2021 because you had Covid, had a family member who had Covid, had to quarantine, had a family member who had to quarantine, or had to take care of a child whose school or daycare was shut-down due to Covid, then the government will effectively give you, in the form of a tax-credit, the amount that you would have earned during the days that you couldn’t work. This is a complicated tax calculation with pages and pages of rules and limitations, but is definitely something that you shouldn’t overlook when preparing your 2021 tax return.
Student Loan Forgiveness is now Tax-Free!
Up until now, if a student borrowed funds for college and couldn’t repay them, that student would be taxed on the amount of any student-loan debt that was forgiven. This tax-treatment of debt discharge follows a long-standing general tax principal: taxpayers should pay tax on any realized wealth increases, including those caused by an elimination of personal liabilities (i.e. if a taxpayer borrowed funds and didn’t repay them, that taxpayer was enriched and should pay tax as a result). The American Rescue Plan Act of 2021 allowed for an exception to this general tax principal and will exclude from income any wealth increase caused by forgiveness of student-loan debt for discharges before 1/1/2026.
Received a Health Insurance Subsidy AND Unemployment in 2021?
For 2021 only! Any family which receives unemployment income in 2021 will effectively get free health insurance if they purchased their 2021 health insurance through Healthcare.gov (the Federal Health Insurance Marketplace). A special rule effective for only the 2021 tax year provides that any taxpayer who has received, or been approved to receive, unemployment compensation for any week beginning during 2021 will be deemed to have total 2021 household income of 133% of the Federal Poverty Level for purposes of calculating the Premium Tax Credit. This, in effect, gives that family the largest health insurance subsidy allowed under the Obamacare rules for 2021 (i.e. the Federal government will pay all of their health insurance for the year).