Filing taxes can be daunting, but understanding a few key terms can make the process smoother and less stressful. Here’s a quick guide to the must-know terms that will empower you this tax season.
1. Adjusted Gross Income (AGI)
Your AGI is your total income minus specific deductions, like contributions to retirement accounts or student loan interest. It’s a critical figure because it determines your eligibility for many tax credits and deductions. Use the Expense Tracker in Life Planner to keep tabs on deductible expenses throughout the year.
2. Tax Credits
Tax credits reduce the amount of tax you owe dollar-for-dollar. Popular credits include the Child Tax Credit and the Earned Income Tax Credit. Life Planner’s Financial Reports can help you identify expenses or situations that might qualify you for credits.
3. Standard Deduction vs. Itemized Deduction
The standard deduction is a set amount everyone can deduct from their taxable income, while itemizing allows you to deduct specific expenses like medical bills or mortgage interest. Not sure which route to take? Use Life Planner’s Budgeting Tools to analyze your expenses and maximize your deductions.
4. Taxable Income
Taxable income is what’s left after subtracting deductions from your AGI. This figure determines your tax bracket. With Life Planner, you can categorize and track income sources to better estimate your taxable income year-round.
5. Filing Status
Your filing status—single, married filing jointly, head of household—affects your tax rates and the deductions you can claim. Not sure which applies to you? The Budget and Budgeting Tools in Life Planner can provide clarity by showing how different statuses impact your financial plans.
6. Withholding
Withholding refers to the amount of tax taken from your paycheck throughout the year. Too much? You get a refund. Too little? You owe. Life Planner’s Savings Goal Tracking can help you set aside funds if you expect to owe taxes.
Stay Organized with Life Planner
The Life Planner app is designed to simplify your financial life, including preparing for tax season. Track income, organize deductions, and monitor financial goals all in one place.
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Make this tax season your most organized yet with Life Planner:
Click the link for your device, install the app, and start managing your finances like a pro. With Life Planner, you’ll stay on top of expenses, track income, and confidently file your taxes. Don’t wait—download now and take control of your financial future!