BOSTON (CBS) – Review your tax situation now so you have some idea what tax bracket you will fall into this year and decide whether you want to do the long 1040 or the simpler and shorter form 1040EZ.
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Estimate your taxes both ways for it is the only way to figure out what is the better deal for you. If your deductions don’t add up to the standard deduction, it’s a no brainer, file the short form and get the larger deduction.
The standard deduction for couples filing jointly is $12,600 and for singles it is one half that at $6,300 for this year.
The highest tax rate this year is 39.6% and that comes into play on any income over $466,950 if you are filing jointly and $415,050 for singles. The lowest tax is 10% for the first $9,275 of income for singles and twice that if you are married filing jointly.READ MORE: Liana Wallace On 'Survivor' All-Black Alliance Falling Apart: 'Just Wanted Us To Make Top 8, Then We Can Have World War II''
Qualified dividend income and long term capital gains will be taxed at 15% for most taxpayers and some could qualify for zero percent and high earners may pay 20%. In addition, high income taxpayers may have a 3.8% unearned income Medicare Contribution Tax applied to their capital gains and other net investment income.
Some good tax planning would be to gift appreciated stock you are holding to your grandchildren if they are in the lower tax bracket. They will take on your cost basis and owe taxes on the profit they make, but they will be taxed at their rate and not yours.
The Kiddie tax will kick in if the kiddo’s investment income is more than $2,100. And the kiddie tax applies to all kids under the age of 19 and full time students under the age of 24. If they have earned income that income will be taxed at their rate.MORE NEWS: 3 Captured After Stolen Car Filled With Stolen Packages Crashes In Holbrook
The American Opportunity Credit was made permanent by Congress. This allows you to take a tax credit of up to $2,500 if you have paid at least $4,000 in college tuition for the year. This credit can be claimed for the first four years of college.