Tax season is right around the corner – so in this video I’m going to share with you 3 things you should keep in mind before filing.
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Hey MoneyLion, my name’s Austin Hankwitz and I talk about personal finance and investing online. I’ve compiled a list of a few things that you should keep in mind. It’s important to remember that this video is just for informational purposes. You should speak to a tax professional if you have questions about or need help with your taxes.
Let’s break down three things: filing your taxes for free, reporting crypto or stock investments, and changes to charitable deductions. By understanding these things, hopefully we can save some money together.
And just so we’re all on the same page, let’s quickly walk through basic information on how taxes actually work – because a lot of people don’t understand. There are a lot of deductions and other but the basics are that in the US we have a progressive tax system – which means taxation progressively increases as your income increases. There are 7 federal tax brackets, ranging from 10% to 37%.
To put some numbers around this – let’s assume you’re not married and made $45,000 in 2021. The first $9,950 you made was taxed as 10%, totaling about $1,000. After you made that first $9,950, every dollar you made beyond that was then taxed at 12% – until you hit about the $40 thousand dollar mark. This is about another $3,700 in taxes – bringing your total now close to $5,000.
That last $5 thousand you made above $40 grand was taxed at 22% – which is $1,100 in taxes. Right? A progressive tax system – taxation increasing as your income increases.
Great! You now have some background on how taxes work so let’s talk about filing them for free. If you make less than $72,000 per year, the IRS will help you file your taxes – for free, you just have to answer some personal questions. Google “IRS free file” – it’ll take you to an IRS.gov URL with more information. If you make more than $72,000 you can still fill out and file the forms yourself. Boom! You just saved yourself about a hundred bucks.
The second thing to know is there are requirements about reporting any stock and crypto transactions. For most apps and platforms – they’ll either give you something called a Form 1099-B or a complete history of your transactions, which you may need to complete your taxes. If you have questions about this form, you should speak to a tax professional.
Heck, maybe you lost money in 2021 – you might be able to deduct that.
Speaking of deductions, our final highlight here are the changes to charitable deductions in 2021. Ordinarily, people who choose to take the “standard deduction” on their taxes cannot claim a deduction for their charitable contributions. But, there was a temporary law passed in 2021 which allows you to deduct up to $300 in charitable contributions on top of the standard deduction. So if you donated to a qualifying charity, this is something that you may want to look into.