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American Military News
6 days ago
- Business
- American Military News
IRS Direct File will be cancelled if Republican tax bill becomes law
The $3.8 trillion Republican tax bill that just passed the House includes a provision to kill off the popular IRS Direct File program, which lets people file their federal income tax returns for free online. The bill still needs to pass the Senate to become law, but if the bill is enacted as currently written, the Direct File program is slated to be eliminated within 30 days of the law's passage. The bill also requires the U.S. Treasury Department to create a task force to design a partnership between the IRS and private-sector tax service providers. The task force would need to identify ways to replace any 'free file programs and direct e-file tax return systems.' That includes the IRS Free File program, an existing public-private partnership. IRS Direct File, which is separate from the Free File program, is a popular free option that offers guidance and support as you fill out your federal income tax return and file your taxes directly with the IRS. Most taxpayers have rated the Direct File program positively: About 90% of taxpayers said their experience was excellent or above average, according to a survey by the General Services Administration of about 11,000 Direct File users in 2024. On top of that, interest in the program is clear: About 73% of taxpayers said they'd be somewhat or very interested in using Direct File, according to a Tax Policy Center report in March, based on a survey of taxpayers aged 18 to 64. The Direct File program has been in Republican lawmakers' crosshairs for a while. In December, almost 30 Republican lawmakers sent a letter to President-elect Donald Trump, calling for him to end the Direct File program on his first day in office. Lawmakers in the U.S. House of Representatives introduced legislation last July to end the Direct File program. Elon Musk, de facto head of the 'Department of Government Efficiency,' or DOGE — also isn't a fan of the program. In February, he posted on social media that the government tech office that developed the Direct File program had been 'deleted.' Currently, the IRS's Direct File page is still up and running. Direct File doubled its reach to 25 states for the 2025 tax season, up from 12 states in 2024, the program's pilot year. An estimated 30 million taxpayers qualify for the Direct File program in 2025, the IRS says. More than 140,000 taxpayers filed their federal tax returns through the Direct File program in 2024. The Direct File program also expanded to accept more types of tax situations for the 2025 tax season. While taxpayers who used the system in 2024 could claim a handful of tax credits, including the earned income tax credit and the child tax credit, that list expanded for this filing season to include the child and dependent care credit, among others. However, taxpayers who want to claim other tax credits, such as the American Opportunity Tax Credit for higher education costs, or the tax credit for the costs of adopting a child, won't qualify for Direct File. And if you're hoping to deduct IRA contributions, Direct File doesn't support that. (See the full list of credits and deductions supported by Direct File on this IRS page.) The Direct File program, now in its second year, allows taxpayers to file their federal tax returns electronically with the IRS. The no-cost tool guides taxpayers through every part of their federal income tax return. Taxpayers can file using a smartphone, computer or tablet. One of the program's advantages is that, if you have questions as you're working on your return, you can get live support directly from the IRS via chat or phone. IRS representatives can answer basic tax questions and help with technical issues in English and Spanish. The Direct File program has income limits, as well as limits on the types of income, deductions and credits you can enter on your tax return. For the 2025 tax season: —Your income must be less than $200,000 (less than $168,600 if you have more than one employer), and if you're married filing jointly, your spouse's income also must fall below these limits. —If you're married filing jointly, your combined income must be less than $250,000. —If you're married and file separately from your spouse, your income must be less than $125,000. To be eligible for Direct File, your income can come from the following sources: —W-2 wages —Social Security income —Unemployment compensation —Interest income —Retirement income (reported on a 1099-R — limited eligibility starts March 2025) But if you're self-employed, or have business or rental income, you can't use Direct File. Same goes for IRA contributions or distributions: If you have either, you can't use Direct File. You can use the IRS Direct File program only if you claim the standard deduction — the program isn't available to people who itemize. But you can claim certain above-the-line deductions: student loan interest, educator expenses and health savings account contributions. You can't use Direct File if you want to deduct your IRA contributions. The Direct File program supports the following tax credits in 2025: —Earned income tax credit —Child tax credit —Credit for other dependents —Child and dependent care credit —Premium tax credit —Credit for the elderly or disabled —Retirement savings contribution credit However, if you want to claim education credits, credits for energy efficient home upgrades or the adoption expense credit, you can't use the Direct File program. More taxpayers will have access to the IRS Direct File program in 2025. In 2024, the IRS kicked off the program with only 12 states; that number has expanded to 25 states for the 2025 tax season. For some of the states that participate in the IRS Direct File program, your federal return information will be transferred automatically to the state tax website, but in some cases you'll have to re-enter your information. Visit this IRS Direct File page to get the details for your state. Here is a list of the participating states: Alaska, Arizona, California, Connecticut, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming If you don't qualify for the IRS Direct File program, you may have other options to file your tax return for free. In addition to Direct File, the IRS offers the Free File program, in which it partners with online tax software providers to provide free federal income tax return filing. Some providers also allow you to file a state income tax return. For the 2025 tax season, your adjusted gross income must be $84,000 or less to qualify for the Free File program. That AGI applies to any filing status: married filing jointly, single, head of household, etc. The IRS also offers the Volunteer Income Tax Assistance (VITA) program, which provides certified volunteers to prepare basic tax returns if you earn less than $67,000 a year, are disabled, or speak limited English. You can find a site near you by visiting this IRS page. ___ © 2025 Distributed by Tribune Content Agency, LLC.
Yahoo
11-04-2025
- Business
- Yahoo
Tax Day Countdown: 6 Last-Minute Tax Savings Tips for College Students
With CollegeBoard reporting rising full-time undergraduate tuition rates for the 2024-2025 school year, college expenses can clearly challenge any budget. That makes it worth looking for ways to at least cut your tax bill if you haven't filed your 2024 taxes yet. For You: Try This: As a college student, you might qualify for significant education-related tax credits and deductions or even have access to tax-free funds to use for important costs. Your job situation and certain retirement accounts may also lead to tax breaks. If you are planning to file your taxes last-minute like it's an English Lit paper due the next day, here are six of the best tax savings tips for college students. If you're in an undergraduate program, the American Opportunity Tax Credit (AOTC) might cut your tax bill by up to $2,500 or provide up to a $1,000 refund. According to TurboTax, it covers money spent on tuition and expenses, like books and equipment, but not room and board. This education credit has some strict rules. You can't claim it on your tax form after your fourth year of studies, and you must take at least a half-time load for one period or more at an eligible school. Plus, to get at least a partial credit, your modified adjusted gross income (MAGI) can't be more than $90,000 if you're a single filer or $180,000 if you're a joint filer. The school should send a 1098-T form that reports the year's education expenses. The first $2,000 in education expenses can qualify for a 100% credit, and an additional $2,000 in expenses qualifies for a 25% credit. Trending Now: While the AOTC offers the bigger tax break, the Lifetime Learning Credit (LLC) is a nonrefundable alternative that could cut your tax bill by up to $2,000, or 20% of $10,000 in eligible education expenses. It's a good backup option due to its more lenient rules. While you still have to attend an eligible school for one period or more, there aren't minimum course load requirements, and the LLC is available for unlimited years. Plus, various programs and training courses qualify as long as they're for building job skills. However, the same MAGI limits apply to get at least a partial credit. If you made student loan payments in 2024, the IRS allows deducting up to $2,500 in interest paid as long as you took that loan out for legitimate educational purposes. There are a few rules to be eligible, including not being someone's dependent and not exceeding the 2024 MAGI limits of $95,000 for single filers and $195,000 for joint filers. Additionally, the deduction is gradually reduced based on your MAGI. The loan servicer will often send a 1098-E form with the interest amount. If not, check your loan statements or online loan account for this information. Whether you or your parents opened the account, you can use funds in a 529 plan or Coverdell education savings account for college expenses, like tuition and textbooks. Plus, you don't have to pay taxes to withdraw that money as long as it goes toward eligible expenses. This tax benefit makes education savings accounts a more attractive funding source than retirement accounts you might feel tempted to tap into. Just keep in mind that you'll usually need to use any remaining Coverdell account funds by age 30, per the IRS. According to the Lumina Foundation, the majority of college students also have jobs. You might have gone the self-employed route for flexibility and started freelancing, delivering meals or tutoring other students. Many business expenses related to this work are deductible on your Schedule C. Some examples could include business mileage, self-employed health insurance, equipment, home office use and even cellphone expenses. Make sure to have documentation backing up deducted expenses and avoid writing off any non-business portions. If it's your first time filing a self-employed return, working with a tax professional may be wise. To both potentially save on taxes and make progress toward building wealth early, consider contributing to available tax-advantaged retirement accounts as a college student. While pretax money put into a traditional 401(k) simply lowers your taxable income, traditional IRA contributions are deductible up to the IRS limits based on your filing status, MAGI and any employer plan coverage. Roth IRA contributions involve after-tax funds and won't reduce your 2024 tax bill, though future tax-free withdrawals are possible. If you weren't a full-time student for at least five months during the year, you might also qualify for the Saver's Credit. It's worth up to $1,000 for a single filers and $2,000 for joint filers. Caitlyn Moorhead contributed to the reporting for this article. More From GOBankingRates 6 Used Luxury SUVs That Are a Good Investment for Retirees4 Affordable Car Brands You Won't Regret Buying in 20257 Overpriced Grocery Items Frugal People Should Quit Buying in 2025How Much Money Is Needed To Be Considered Middle Class in Every State? This article originally appeared on Tax Day Countdown: 6 Last-Minute Tax Savings Tips for College Students Sign in to access your portfolio
Yahoo
24-03-2025
- Business
- Yahoo
Tax calculator: How much do I owe in taxes?
(NewsNation) — Nobody likes paying taxes, but it's even more frustrating to get blindsided by a tax bill you never saw coming. That's why it's important to have a general idea of how much tax you owe, which varies based on where you live, how much money you make and your filing status. The IRS expects more than 140 million individual tax returns to be filed by the federal deadline on April 15. If you need more time to file your return, you can request an extension, but you need to do so by the deadline. How long does it take to get your tax refund? If you paid more to the government through the year than you were required to, then you could receive money back as a tax refund. In 2024, the average tax refund was $3,138, and the IRS issued about 105 million refunds. That means thousands of dollars are potentially at stake when you file your federal tax Tax: State Tax: Total Tax: Effective Tax Rate: Take Home Pay (Monthly): The calculators on this website are provided for educational purposes only… From Your Money on NewsNation Several factors determine your tax bill, but two of the most important are your income and filing status. In the U.S., the federal income tax is progressive, which means as your income goes up, so does the tax rate. How to check your state tax refund status When your income jumps to a higher tax bracket, you don't pay the higher rate on your entire income. Instead, you are taxed only on the part that is in the higher bracket. Currently, there are seven federal income tax brackets with rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your filing status determines which rate your income gets taxed at. The five filing statuses are: Single: If you are unmarried or legally separated as of Dec. 31 for that tax year Married filing jointly: You are married, and both you and your spouse agree to file a joint return. Married filing separately: If you are married, but you and your spouse do not agree to file a joint return Head of household: You are unmarried but take care of someone else who qualifies as a dependent Qualifying surviving spouse: Can be claimed for the first two tax years after the death of your spouse if you meet certain requirements If you're unsure about your filing status, use the IRS tool here. Tax season: How to file for free Depending on where you live, you may owe state income tax on top of federal income tax, which requires you to file a separate return. There are a few popular ways to lower your tax bill: Take advantage of tax credits: A tax break that reduces your tax liability dollar for dollar, potentially increasing your refund. Popular credits: Earned Income Tax Credit (EITC), Child Tax Credit (CTC), American Opportunity Tax Credit (AOTC), Saver's Credit Maximize your deductions: Tax filers can claim the standard deduction, which reduces their taxable income by a specific amount. Others, particularly homeowners, may choose to itemize their deductions, lowering their taxable income by subtracting certain expenses like mortgage interest. Contribute to a retirement plan: Saving for the future can help lower your tax bill today. Contributing to a traditional 401(k) reduces your taxable income, which may cut your tax bill. Putting money in a traditional individual retirement account (IRA) may be tax deductible depending on your income and retirement plan at work. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Yahoo
02-03-2025
- Business
- Yahoo
9 Tax Breaks the Middle Class Should Know Of
Paying taxes is never fun. But if you're part of America's middle class — defined as those who earn between two-thirds and double the median income — you could qualify for some tax breaks. Read More: Find Out: From tax deductions that lower your taxable income on a dollar-per-dollar basis to tax credits that reduce your tax liability, here are some tax breaks the middle class should know about. Did you pay education costs last year? You could be eligible for a tax break or two. 'There are almost too many tax breaks related to education to keep track of,' said Mark Luscombe, CPA and principal analyst at Wolters Kluwer Tax & Accounting. 'There are 529 plans and Coverdell Education Savings Accounts for tax-favored funding of future education expenses.' With a 529 plan, your contributions aren't tax deductible, but they can earn interest. You can use that money on qualified education expenses without paying federal tax. A Coverdell education savings account is also meant for qualified education expenses. Contributions aren't tax deductible, but distributions are tax-free when used for education expenses. Others education tax breaks include: American Opportunity Tax Credit: A maximum $2,500 per eligible student to help with the first four years of higher education costs. Lifetime Learning Credit: $2,000 tax credit to offset the cost of undergraduate, graduate and professional degree courses. It can also help with job-related education. Student loan interest deduction: If you've paid student loan interest, you could deduct up to $2,500 in interest paid during the year. U.S. Savings Bonds: Some savings bonds qualify for a tax break when used to pay tuition and other qualifying education expenses. Income limits and other criteria apply. Discover Next: If you're a middle-class business owner, you could potentially qualify for a tax break by switching from an S-Corp to a C-Corp. 'Since the [Section] 199A deduction hasn't really kept up with inflation, every year there are more taxpayers I see who would benefit from a C-Corp rather than an S-Corp,' said Crystal Stranger, senior tax director and CEO of OpticTax. This tax break works for upper-middle-class taxpayers, too. 'For upper-middle-class taxpayers, the tax rate is often lower, especially if there are international sales that will qualify for the 13.125% effective tax rate after applying the Foreign Derived Intangible Income discount,' said Stranger. 'And when selling the company only C-Corps are eligible for tax-free gains with the QSBS deduction, and S-Corp owners miss out.' There's also a tax break for saving for retirement. For example, you could get the Saver's Credit for contributing to a 401(k). This credit is up to $2,000 or $4,000 if married filing jointly. The exact credit amount depends on your income. Contributing to other accounts, like an IRA, could also get you a tax break. Any contribution to a Traditional IRA is tax-deductible. Annual contribution limits depend on the year and your age. For 2024, you can contribute up to $7,000 or $8,000 if you're 50 or older. As per IRS rules, you can deduct up to 50% of your adjusted gross income (AGI) in charitable contributions. Some people can only deduct 20% to 30%. To count, those charitable contributions must be made to a qualified organization like a public charity or private operating foundation. You'll also need to itemize deductions, rather than take the standard deduction. More From GoBankingRates6 Reasons Your Tax Refund Will Be Higher in 2025 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth How Much Money Is Needed To Be Considered Middle Class in Every State? This article originally appeared on 9 Tax Breaks the Middle Class Should Know Of Sign in to access your portfolio
Yahoo
11-02-2025
- Business
- Yahoo
7 Biggest Mistakes Gen Z Will Make on Taxes This Year, According to Experts
The less money you lose to taxes, the faster you can build wealth. But tax planning is a game with its own complex rules and strategies — which is why you hear so many tales of billionaires paying lower effective tax rates than middle-class Americans. Find Out: Be Aware: 3 Sneaky Things You Didn't Realize Your Tax Software Was Doing — And How to Stop Them This Year If you want to win the game, you need to learn winning strategies. And most young adults barely know how to play the game at all. Avoid these common tax mistakes Gen Z will make on taxes this year to put more money toward building wealth and less toward lining Uncle Sam's pockets. Most young adults prepare their own tax returns, because they don't feel they earn enough to justify hiring an accountant. But that means they often miss out on tax savings they qualify for — especially tax credits. Logan Allec, CPA and owner of Choice Tax Relief, pointed out the most often overlooked: 'Common tax credits that many Gen Zers qualify for include the Earned Income Tax Credit, the American Opportunity Tax Credit, the Lifetime Learning Credit and the Savers (Retirement Contributions) Credit.' Double check whether you qualify for any of those, because the government might just owe you money rather than vice versa. For You: Like other assets, you don't owe taxes on profits from cryptocurrency until you sell. So, if you didn't sell any crypto assets last year, you don't owe capital gains taxes on them. Except you knew there was a 'but' coming. If you earned income in cryptocurrency, you owe taxes on it. If you mined coins or sold NFTs or staked ethereum to earn rewards, you owe taxes. 'Make sure that you report all of your capital transactions during the year, including those involving cryptocurrency,' said Allec. 'If you don't report your cryptocurrency sales and exchanges on your tax return, you could find yourself the recipient of an IRS CP2000 Notice in the mail: basically a 'gotcha' letter from the IRS to taxpayers who don't report all their income.' If you worked a side hustle and earned $600 or more, the payer should send you a 1099 form at the end of the year. Even if you earned less than $600 from a given side gig, Uncle Sam still demands that you report it. Some self-employed workers opt not to, since there's no paper trail without a 1099. But they do so at their own risk. Unfortunately, self-employed workers owe both the employee and employer sides of Medicare and Social Security taxes. That comes to 15.3% total, double the 7.65% rate that W-2 employees pay. Employers who pay you on a 1099 basis don't typically withhold for the taxes you owe. They pay you everything up front, and it falls to you to budget and pay those taxes. 'Many young adults spend everything they earn from their side gigs, not realizing they'll owe a hefty tax bill the following April,' said CFP Brian Seymour, founder of Prosperitage Wealth. Actually, it's worse than that. Self-employed workers owe estimated taxes each quarter, throughout the tax year. If you fall behind and only catch up when you file your tax return, the IRS can hit you with late fees and penalties. Self-employed workers can deduct some business-related expenses — while still taking the standard deduction for their personal expenses. Melissa Murphy Pavone, founder of Mindful Financial Partners, explained, 'Self-employed Americans should track all expenses related to their business or freelancing. That includes travel, a home office, meals, office supplies and more. These workers can deduct these from their business income directly, while still taking the standard deduction.' Don't go too far in the opposite direction, though — research which of your expenses qualify as deductions before you file. Medical expenses often add up enough for young adults to itemize their deductions. 'Many Gen Z workers have no idea that they can deduct unreimbursed medical expenses from their taxable income,' said Neal K. Shah, chairman of Counterforce Health. 'As insurance denial rates soar, this issue is becoming more widespread. Yet most taxpayers don't realize that those denied claims could be deducted on their taxes as out-of-pocket medical expenses — if their total medical expenses exceed 7.5% of their adjusted gross income.' As a refresher, you can deduct from your taxable income the money you contribute to a traditional IRA, but you pay taxes on withdrawals in retirement. Roth IRA contributions work in reverse: You can't write off the contributions now, but the money compounds tax-free, and you pay no taxes on withdrawals in retirement. 'Gen Zers are generally in their lowest earning years and should take advantage by making contributions into after-tax accounts like Roth 401(k) [plans] and Roth IRAs,' added Seymour. 'The 10% and 12% tax brackets are historically low and likely the lowest that young adults will see in their lifetimes. 'By paying the taxes now, they remove the risk of a higher tax rate in the future and the inability to contribute to a Roth IRA if their income gets too high.' Plus, as a young adult, your Roth account has decades to compound tax-free before you retire. Imagine you contributed $7,000 per year for the decade between ages 22 and 32, then never contributed another cent. If you averaged a 10% annual return and left the money to compound from age 32 to 62, you'd end with $2,283,419 in your Roth IRA — every dollar of which you can withdraw tax-free, and theoretically never pay taxes again. Game: won. More From GOBankingRates 4 Unusual Ways To Make Extra Money That Actually Work How Middle-Class Earners Are Quietly Becoming Millionaires -- and How You Can, Too This article originally appeared on 7 Biggest Mistakes Gen Z Will Make on Taxes This Year, According to Experts Sign in to access your portfolio
