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What Medical Expenses Can I Deduct From My Taxes?


Medical expenses add up quickly, especially if the costs aren’t covered and reimbursed through your health insurance. If you or your dependents have racked up medical expenses, you might have the opportunity to claim them as a deduction on your next tax return.

To ensure you’re making the most of the medical expense deduction, AA Tax & Accounting Services is here to breakdown how it works.

Are medical costs tax-deductible?

Suppose you or a dependent have a high volume of medical expenses. In that case, you’ll be pleased to know that the Internal Revenue Service allows you to deduct unreimbursed medical expenses from your tax return.

However, there are stipulations to the types of medical expenses that can be counted towards your tax deductions.

When filing your tax return, you can deduct qualified medical expenses if they equal more than 7.5% of the previous year’s adjusted gross income.

For instance, if your adjusted gross income is $75,000, any amount exceeding the first $5,625 of medical expenses can be deducted. This means that if your medical expenses totaled $15,000, you would be eligible to deduct $9,375.

Medical expenses eligible for tax deductions

To prepare you for the upcoming tax season, we’ve put together a list of qualified medical expenses that can be deducted from your tax return:

  • Acupuncture or other forms of alternative treatments
  • Addiction treatment, which includes food and lodging at a rehabilitation center
  • Adaptive equipment including wheelchairs, shower seats, and other disability accommodations
  • Birth control pills
  • Blood-testing kits and strips for diabetes
  • Breast pumps and pumping equipment
  • Chiropractic services for medical purposes
  • Diet food and supplements when prescribed by a doctor to alleviate a specific medical condition
  • Eye exams and, if applicable, contact lenses and prescription glasses
  • False teeth
  • Hearing aids or other hearing equipment
  • Home improvements to increase accessibility due to a medical disability
  • Household help for nursing care services
  • Lodging when traveling out-of-town for a medical treatment
  • Organ transplants
  • Prosthetic limbs
  • Psychiatric care
  • Reproduction costs covering abortions, vasectomies, and fertility treatments
  • Service animals meals, training, and veterinarian expenses
  • Sex-reassignment surgery and hormone therapy to treat gender identity disorder (GID)
  • Special education
  • Programs supporting physical or mental conditions such as dyslexia or ADHD
  • Public transportation costs to and from medical visits
  • Wigs for those with a medical condition such as cancer or alopecia

You must track all your medical costs throughout the year, so come tax season, you can easily determine if you need the requirements to deduct your medical expenses from your tax return. Hold onto all copies of receipts and make a note of which expenses haven’t been reimbursed so you can reduce your tax bill with little headaches.

Additional rules to be aware of

If you’re planning to deduct medical expenses from your tax bill, here are two additional rules to be aware of:

1. You are only allowed to include medical expenses that were paid during the tax year.

2. If you were reimbursed for any medical expense through your insurance, that bill cannot be included in your tax deduction.

How to claim the medical tax deduction

Now that you’re aware of what types of medical expenses can be deducted from your tax bill, you must set yourself up for success come tax season.

You will be required to itemize your deductions, which is why it’s helpful to hold onto and organize all receipts you receive throughout the year.

Tax consulting services in Cedar City, Utah

If you have a high amount of medical expenses, AA Tax & Accounting Services can help you better understand how to maximize your medical expense deduction to save you the most money on your upcoming tax bill.

No one should go into tax season with their questions unanswered. Our team of tax consultants has the experience navigating the most effective strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money on your medical expenses. Contact us to schedule an appointment.

Tax Info For Living In Utah But Working In Another State


Tax season can be stressful — and if you find yourself living in Utah and working in another state, you might be unsure how to navigate filing your tax returns this year. Depending on your status as a Utah resident, you may be required to pay tax on any income earned elsewhere.

No matter where you earn an income, you will need to file a tax return. When earning income in one state while living in another, you might find yourself filing a state tax return in your state of employment. While certain states like Alaska, Texas, Wyoming, Florida, New Hampshire, Washington, South Dakota, Nevada, and Tennessee don’t charge income tax, the state of Utah does.

To help you navigate this scenario, AA Tax & Accounting Services has put together a quick guide explaining when you will be required to pay taxes on income earned in another state.

Are you a Utah resident on non-resident?

If you live in Utah and work in another state, your state income tax requirements will be dependent on your Utah state residency.

When your permanent residence is in Utah, and you travel outside of the state for work, how long are you in the other state?

Do you have another residence in the other state?

If you leave your Utah residence for less than half a year, your income in another state is taxable in Utah. However, if you are a non-resident of Utah, which is classified as someone who has property in Utah but lives elsewhere for more than half the year, you aren’t required to pay Utah state income tax on any earnings from the other state since you aren’t legally a Utah resident.

What a non-resident needs to know

If you have earned income in Utah but are considered a non-resident of the state, you must file a Utah state tax return. In most cases, this income is earned while conducting business in the state, and you will need to file a Utah tax form called Form TC 40B.

Am I required to file taxes in both states?

In most situations, you will be required to file state income tax. There are a few scenarios where you might not be required to file taxes in both states.

The first reason is if the state doesn’t charge state income tax, such as Alaska, Texas, Wyoming, Florida, and a few others.

Another situation in which you might not be required to file taxes in both states is when a state has an agreement with bordering states. This agreement, known as a reciprocal tax agreement, allows individuals to live in one state and work in the other without filing two state tax returns.

Because Utah does not have reciprocity, you will likely need to file two separate state tax returns: a permanent resident and another non-resident.

How to claim credits for out of state tax

When filing your tax return as a Utah resident and claiming income that you earned out-of-state, you have the option to claim a credit for any income taxes paid to another state. This rule prevents you from facing double taxation on income earned out-of-state.

Tax consulting services in Cedar City, Utah

If you’re dealing with a unique situation, such as living in Utah and working in another state, we recommend consulting certified public accountants like AA Tax & Accounting Services when filing your tax return.

From one-time tax consulting services to ongoing consulting services, our tax consultants work with many clients as their tax advisor and tax preparer — ensuring that your tax team understands your taxes backward and forwards. You can have peace of mind knowing that our team has the experience to provide you with the most effective strategies for maximizing deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help navigate tax season smoothly when living and working in separate states. Contact us to schedule an appointment.

What First Time Investors Should Know About Tax Time


You have your entire future laid out in front of you, and with proper planning for retirement, you’ll be able to settle down without worrying about finances. Investing in your future early on is a great way to set yourself up for success — but it’s never too late to start. If you’re a new investor heading into your first tax season, you might be wondering what you need to know about your taxes and investments.

We know that tax season can be daunting, and with multiple investments, it can seem even scarier — it doesn’t have to be that way! The team at AA Tax & Accounting Services is here to help you navigate the tax process so you can feel confident in your investments. Here are our top tips for first-time investors for tax time.

Understand Realized Gains

If you’re new to investing, you might not fully comprehend how investments are taxed. Something you need to consider is the realized gains on your investment. If you purchase a stock that sees an increase in value, you won’t be expected to pay taxes on those gains every tax season. You will only be expected to pay taxes when you “realize” the gain when you sell your stock shares.

For example, if you purchase 50 shares of a stock for a cost of $50 but the stock value increases to $75, you won’t be required to pay taxes on the $25 gain until you choose to sell your shares. With any investment, you can expect to see values rise and fall over time. If your stock share goes down in value, it will be a similar situation to realized gains where you won’t face any tax implications until your shares are sold.

Long Term & Short Term Gains

Now that you’re on your way to becoming an investing pro, you must understand the difference between short-term capital gains and long-term capital gains before heading into tax season.

Your investments’ tax implications will vary depending on how long you have held onto that particular stock. This means that your gains will be taxed at the short-term capital gains rate if you sell your shares after only holding them for a year or less. If you have held onto the stock for more than a year, your gains will be tased at the long term capital gains rates. Knowing how long you have held each of your investments can help you determine if selling or holding onto your shares a little longer is the best choice financially.

The tax rate for short-term capital gains is determined by your specific income tax bracket, while long term capital gains tax rates are typically lower than your income rate and not specific to an income bracket.

Offset Income with Capital Losses

If a few of your investments didn’t pay off this year and you have more losses than gains, you can apply up to $3,000 of your investment losses and apply that against your income. Although experiencing a loss on the investment isn’t the goal, applying the loss against your income allows you to reduce your annual income and potentially offset having a higher-taxed income. If your losses are more than $3,000, you can apply that loss to a future tax season as well.

Tax Consulting Services in Cedar City, Utah

As a first time investor, it can be difficult to understand the tax implications of your investments. If you’d like to feel confident in executing the right tax strategies to save you the most money, we recommend consulting certified public accountants like AA Tax & Accounting Services when preparing this year’s tax return.

From one-time tax consulting services to ongoing consulting services, our tax consultants work with many clients as their tax advisor and tax preparer — ensuring that your tax team understands your taxes backward and forwards. You can have peace of mind knowing that our team has unparalleled experience dealing with taxes on investments and can provide effective strategies for maximizing deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money come tax season. Contact us to schedule an appointment.

Are Bonuses Taxable?


Receiving a bonus at work is always an exciting surprise. But before you spend it all to fund a vacation or pay off some bills, you might be wondering if your bonus is taxable.

The short answer: yes, your bonus is taxable.

Unlike the regular paycheck you receive from your employer, any bonus payments are considered supplemental wages, which means your bonus will be taxed — and they will be taxed more than the standard income rate. These same tax rules apply to more than bonuses, including moving costs, tips, overtime, and severance.

When you receive a bonus, your employer will also withhold a designated amount sent to the Internal Revenue Service. AA Tax & Accounting Services has put together a quick guide to help you calculate how much of your bonus will be taxed.

How to Calculate the Taxes on Your Bonus

How much of your bonus will you be able to put the deposit into the bank? To determine how much of your bonus will be taxed, consider the following factors:

  • Social security tax – As of 2020, you are required to pay socials security tax on any compensation received up to $137,000. Your employer will take out 6.20% from your bonus check for social security until you hit this benchmark.
  • Medicare tax – Any compensation you receive much have medicare tax factored in. This means your employer will deduct 1.45% of the total bonus for Medicare tax.
  • Federal income tax – The standard federal tax rate is 25% — however, under tax reform, this number has been adjusted to 22% for bonus withholdings. If your employer withholds more than 22% for federal income tax, you will receive that overpayment back in the form of a tax refund when you file your annual taxes.
  • State income tax – The majority of states require residents to pay state income tax, which applies to bonuses. Depending on the state you work in, your employer will withhold the designated amount required by state law.
  • 401k contributions – If you contribute to a 401k with your standard paycheck, you will likely have a portion withheld from your bonus as well. This percentage will vary depending on the number you have set with your employer
  • .

All of these must be considered when determining how much of your bonus check will be withheld. To help illustrate these withholdings, we’ve put together an example calculation to demonstrate how you could calculate these numbers based on a $15,000 bonus check:

  • $15,000 x 25% = $3,750 in Federal tax
  • $15,000 x 5.25% = $787.50 in State tax (if applicable)
  • $15,000 x 1.45% = $217.50 in Medicare tax
  • $15,000 x 6.2% = $930 in Social Security tax

Using this example, you would deduct a total of $5,685 from the $15,000 bonus — which is a tax rate of 37.9%!

Tax Consulting Services in Cedar City, Utah

Suppose you have received a bonus or will be receiving one and have questions regarding supplemental income tax withholding. In that case, we recommend consulting certified public accountants like AA Tax & Accounting Services. Our team can help you better understand how your bonuses will be taxed and prepare you for the upcoming tax season, where it might be possible to recoup some of it through a tax refund. We have the experience to guide business owners on the best strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you navigate the tax process when receiving supplemental income from your employer. Contact us to schedule an appointment for tax consulting services.

Your Stimulus Check Tax Questions Answered


The COVID-19 pandemic has impacted the lives of many — from getting sick yourself or knowing someone with a positive test result to losing a job or business to being stuck inside working remotely. There have been a lot of obstacles to overcome. Because of the impact on the economy, many United States citizens received stimulus checks from the government.

While everyone likes waking up to a surprise deposit in their bank account, it might leave you with a lot of questions.

What are the qualifying factors to receive the money?

Will you need to pay taxes on the stimulus check?

There’s no reason to stress about your stimulus check as you head into tax season. To help you better understand who receives stimulus checks, how you’ll receive the payment, and if the payment will be taxed, AA Tax & Accounting Services, LLC has put together a quick guide to answer some of the most common questions about the stimulus checks.

Who Qualifies for a Stimulus Check?

Individuals will receive a stimulus check if they:

  • Have a social security number – Those with a social security number are eligible to receive the stimulus payment, as well as an additional payment for any children in the household with a social security number.
  • Are not claimed as a dependent – If claimed as a dependent, the individual will not be eligible to receive the stimulus check. The person claiming them would receive it.
  • Earned within the qualifying bracket – Individuals filing taxes solo and earned less than $87,000 are eligible to receive the payment. For joint filers, they must earn less than $174,000 jointly to receive the stimulus check. Those earning more than the specified amount will receive a reduced payment.

These are only a few of the qualifications to receive a stimulus check, but the most common ones to be aware of.

How Will You Recieve Your Stimulus Check?

If you continue to be eligible for upcoming stimulus checks, you’ll continue to receive them the same way you have previously. The three ways for you to receive a stimulus check are through a direct deposit (which will automatically be set up if you received your 2019 tax return via direct deposit), a paper check that you will receive by mail, or by a debit card.

If you did not receive any of the stimulus checks that went out in 2020 or early 2021 but were eligible for the payment, it’s not too late to receive it. When filing your tax return this year, you can claim the tax credit.

Will I Need to Pay Taxes on My Stimulus Check?

If you are eligible to receive a stimulus check, you will not be required to pay taxes on the payment when you file your tax return this year — this goes for stimulus checks received in both 2020 and 2021. In addition, your stimulus payment will not be counted as income used to determine your eligibility for government assistance.

Tax Consulting Services in Cedar City, Utah

Do you still have questions regarding stimulus checks?

If so, AA Tax & Accounting Services can help you better understand the stimulus check process and how it impacts your tax returns. No one should go into tax season with their questions unanswered. Our team of tax consultants has the experience navigating the most effective strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money. Contact us to schedule an appointment.

Federal And Utah State Tax Changes For 2021


2021 is here, which means it’s time to be out with the old and in with the new. The same goes for your taxes! While you will still be paying taxes in 2021, there are some new tax laws in place that might change your tax return.

Tax changes don’t need to be stressful or confusing. AA Tax & Accounting Services, LLC is here to walk you through the tax changes that will be impacting Utah residents in 2021 so you can feel confident as we head into tax season.

2021 Tax Changes for Utah

Although there are a few changes for Utah residents, there aren’t as many tax law adjustments as there have been in previous years. This is because the legislative session was shorter than usual because of the COVID-19 pandemic. Since sessions were shorter, fewer tax changes were put in place on January 1, 2021. While there aren’t many tax changes to be aware of, it’s still important that you have a full understanding of the changes and what they mean for you.

To help you feel more confident in these adjustments, here are two tax changes that will impact Utah residents and how they will impact your tax return.

Utah Excise Tax Changes

An excise tax refers to the taxes placed on manufactured goods that businesses often pay and pass along to the consumer. The taxes are levied when the product is manufactured instead of at the sale of the good because the tax costs are passed along to the consumer, the products’ price increases or decreases according to the current tax rate.

As of January 1, 2021, the state of Utah imposes an excise tax rate of 1.2% on the sale of prepaid wireless telecommunications services.

Other Utah Tax Changes

The excise tax rate isn’t the only change that Utah residents need to be aware of. As of January 1, 2021, individuals can use the revenue from the state’s income and personal property taxes for more than just public or higher education (like they were able to in the past). The allowable use has been expanded to be used for services supporting children and individuals with disabilities.

Tax Consulting Services in Cedar City, Utah

While there were fewer tax changes than usual in 2021 due to the COVID-19 pandemic, the adjustments to tax rules can still be challenging to navigate — especially if you’re dealing with a unique situation. Suppose you’d like to feel confident in how these tax changes affect your taxes. In that case, we recommend consulting certified public accountants like AA Tax & Accounting Services when making any decisions or changes to your tax return.

From one-time tax consulting services to ongoing consulting services, our tax consultants work with many clients as their tax advisor and tax preparer — ensuring that your tax team understands your taxes backward and forwards. You can have peace of mind knowing that our team has the experience to provide you with the most effective strategies for maximizing deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money come tax season. Contact us to schedule an appointment.

Tax-Deductions For The Self-Employed


As a small business owner, you know how important it is to save money wherever possible. That’s why it’s important to take advantage of tax deductions available to you. If you are self-employed and work from your home, you might be eligible to subsidize some of the related costs you might otherwise classify as personal expenses — helping to lower your tax bill.

AA Tax & Accounting Services is here to guide self-employed individuals through the tax deductions process to save the most money possible. Here are a few tax deductions to watch out for when filing your taxes this year.

5 Tax Deductions for Self-Employed

1. Home Office

To claim a home office deduction, you need to have part of your home used exclusively to fulfill the role. If you can prove you have a home office within your home used consistently and solely for your job, you can have part of your utility bills and insurance costs deducted from your business income. In some instances, you are even able to write off a portion of your rent or mortgage.

While many self-employed individuals are eligible for a home office deduction, many taxpayers don’t take advantage of this deduction. This might be because they are afraid to claim it, or they might not have the required records organized and ready to go. If you have a designated space in your home to conduct your business, it’s worth looking into this deduction to see if you’re eligible.

3. Technology and Equipment

Whether you recently purchased a new laptop to be more efficient during the day or you need to stock up on tablets for a client project, you can write off any technology and equipment used for business purposes. This includes everything from large technology like laptops and camera equipment to small items like phone chargers and keyboards.

3. Bank Fees

If you have a bank account specific to your business that incurs any fees, as a self-employed individual, you are eligible to write those off. When reviewing your bank statement, keep an eye out for the following fees that can be claimed as a deduction:

  • Maintenance fees
  • Overdraft fees
  • Late fees
  • ATM fees
  • Credit card membership fees
  • Loan setup fees

4. Business Vehicle Use

Depending on the nature of your business, you might be able to receive a deduction for the use of your vehicle. While most people assume a business vehicle deduction is only applicable to services like Uber or Lyft, that’s most definitely not the case.

Suppose you’re self-employed and use your personal vehicle for transportation to and from client meetings, to make deliveries, to pick up supplies, or another work-related outing. In that case, you can successfully claim this tax deduction. To make this claim, you will need to keep accurate records of the dates and miles you drove specifically for a work-related reason.

5. Meals

Although you won’t be able to claim a full deduction for meals, business-related meals can be claimed as a 50% deduction. This means that for any meals you purchase through your business, whether it’s a client dinner or a meal for a vendor, you are only allowed to deduct 50% of the total cost of the meal.

Review your dining transactions for the year and write off the following types of meals:

  • Client meals when you pay for the entire meal
  • Meals while traveling for business
  • Office snacks for you and employees
  • Meals for meetings with colleagues

Tax Consulting Services in Cedar City, Utah

If you’re self-employed, we recommend consulting certified public accountants like AA Tax & Accounting Services to better understand all the tax deductions available to you. We have the experience to guide business owners on the best strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right self-employment tax strategies to save you money. Contact us to schedule an appointment.

Accounting Advice When Going Through A Divorce


When you’re in the middle of a divorce, you don’t have time to focus your attention and energy on much else. But unfortunately, your taxes aren’t going to wait until you have less on your plate. Filing your taxes for the first time post-divorce can be complicated — and there are a lot of details you and your ex will need to sort out beforehand.

To help guide you through tax season, AA Tax & Accounting Services has put together a list of accounting advice for when going through a divorce.

5 Accounting Tips For When You’re Going Through a Divorce

1. Determine Your Filing Status

First things first, you need to understand your filing status. Your marital status will determine this at the end of the year.

Were you divorced by December 31st of the tax year?

If you were divorced by then, you and your ex would file your taxes separately. However, if you were in the process of splitting up but didn’t have all the details of your divorce finalized by the end of the tax year, you will still have the option to file a joint tax return should you choose to do so.

Until your divorce decree is finalized, you can file jointly — which is likely to save you money.

2. Navigate the Transfer of Assets

It’s important to note that when transferring property assets from one spouse to another during a divorce settlement, the person receiving the asset will not be required to pay taxes on it. However, if the recipient chooses to sell that property, later on, they will have to pay capital gains tax on all the appreciation before and after the transfer. When navigating the transfer of assets process, you need to consider the tax basis and not just the property’s value.

3. Understand Exemptions for Dependents

Once finalized, your divorce decree will state which partner can claim any children as dependents. If this was not specified in your divorce decree, the custodial parent obtains the ability to claim the child(ren) as dependents.

In scenarios where parents have joint custody, the parent which the child resides for most of the tax year gets to claim the child as a dependent.

Suppose, for some reason, you and your ex would prefer that the noncustodial parent claims the dependent. In that case, this is possible if the custodial parent signs a waiver indicating that they will not claim the child as a dependent on their taxes that year.

4. Consider the Implications of Child Support

Child support will not affect your taxes at all. The child support payments are not taxable income for the recipient. Similarly, the payments are not tax-deductible for the parent that is paying child support.

5. Factor in Alimony Payments

Unlike child support payments, alimony payments are taxable income for the person receiving them. Likewise, they are tax-deductible for the parent who is paying the alimony.

All the details surrounding the alimony payments must be laid out within your divorce agreement for alimony payments to be taxable. If the alimony isn’t listed in the decree, the Internal Revenue Service won’t consider the payments to be true alimony.

Tax Preparation Services in Cedar City, Utah

Divorce can be stressful, but navigating the tax process post-divorce doesn’t have to be. AA Tax & Accounting Services is a full-service accounting firm that can help you navigate the process seamlessly. Our team has spent years serving Cedar City, Utah, and surrounding Southern Utah towns.

Contact us today to schedule an appointment for individual tax preparation.

Business Tax Strategies

Business Tax Strategies

Business Tax Strategies

When the financial year comes to a close, it’s important to take into account all the deductions and credits that can help you save money on your taxes. But navigating all of these cost-saving tax strategies can be a stressful process if you don’t know where to begin.

The team at AA Tax & Accounting Services has put together a list of strategies that can help you maximize your credits and deductions.

Take Advantage of the Health Care Tax Credit

If you pay for at least half of your employees’ health insurance premiums, have fewer than 25 full-time employees, and your employees earn an average annual salary of $50,000, then you might be eligible for the health care tax credit. This can save you money on your taxes but is helpful to navigate with the help of a certified public accountant.
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Consider Charitable Contribution Deductions

If your business has made any charitable contributions, you will want to deduct these when filing your taxes. A charitable contribution can be anything from donating money, goods, or services to an organization. When these offerings are donated, you can deduct the market value of the contribution when filing your tax return.

Account for Property Deductions

If your business has recently changed locations or acquired a new property, you can take advantage of property deductions. When this happens, you can deduct up to $500,000 of eligible business property. But keep in mind, that you can only use this deduction in the year that you first obtain the property.

Utilize the Work Opportunity Credit

When your business hires employees that are veterans, disabled, or part of another disenfranchised group, you are eligible for the work opportunity tax credit. This can be very beneficial when it comes to filing your tax report because you can receive up to 40% of the first $6,000 paid to a new employee from a disenfranchised group. However, it’s important to note that the size of this credit can vary in different situations.

Offer Child Care Expenses

Do you provide child care expenses for your employees? If so, you are eligible to receive a tax credit! If you pay for child care expenses, the credit will cover 25% of your paid expenses up to $150,000 annually.

Fund an Employee Retirement Plan

If you don’t have a retirement plan set up for your employees, it can be a great opportunity for you to save money on taxes. Set up and fund a qualified plan that is recognized by the Internal Revenue Service and you’ll be able to start taking advantage of the tax savings. There isn’t a one size fits all retirement plan for every company. Our team of professionals can help walk you through the different contribution plans and determine which is best for your business and your goals.

Account for the Cost of Gifts

If you’ve purchased any gifts for customers or vendors over the past year, you have the opportunity to deduct up to $25 per person off the cost of gifts. However, you aren’t able to claim this deduction if the gifts were provided to anyone bearing the same name as your business.

Tax Consulting Services in Cedar City, Utah

We recommend consulting certified public accountants like AA Tax & Accounting Services when making any decisions or changes to your business tax return. We have the experience to guide businesses on the best strategies for maximizing their deductions and tax credits with our accountant services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money come tax season. Contact us to schedule an appointment.

Gift Laws and Tax Implications in Utah

Gift Laws and Tax Implications in Utah

Gift Laws and Tax Implications in Utah

Everyone loves gifts, but did you know that if you gift a large sum of money you might need to pay a federal gift tax? Before gifting money, you must understand the federal tax laws to ensure you’re following all gift tax guidelines set by the Internal Revenue Service (IRS).

AA Tax & Accounting Services has compiled a guide to help you navigate gift tax for Utah residents — keep reading to learn more.

What Is Gift Tax?

The gift tax is a federal tax that is applied to money or property that is gifted to another person for nothing in return. It also applies to transfers where the gift giver receives less than the full value in return.

You may be wondering why you’ve never heard of this or paid a gift tax — it doesn’t apply to all gifts. If your gift or inheritance meets the set criteria, the IRS can collect a tax if you’ve already exceeded the annual or lifetime gift exemptions. So what are these exemptions? Let’s find out.

When Is a Gift Tax Applied?

As of 2020, the annual exclusion is set to a gift of at least $15,000 in a single calendar year — this number increases to $30,000 if a couple is gifting money from joint accounts or assets. Additionally, there is a cap on the amount a person can be gifted within their lifetime. This lifetime exclusion was raised to $11.58 million in 2020.

If your gifts are valued at or above these thresholds, you will need to report it to the IRS. Any gift of money or assets under these amounts are excluded from gift taxes.

Gift Tax for Utah Homeowners

If you live in Utah, there is no inheritance tax. But that doesn’t mean you’re always off the hook when it comes to paying taxes. If you are gifted something in an inheritance from a person who lives in a state other than Utah, there might be an inheritance tax applied to out-of-state inheritors. This varies from state to state, so you must take the time to understand inheritance laws if you inherit money or assets above the specified threshold from someone who lives outside of Utah.

Similarly, Utah also doesn’t have a gift tax. You will follow the same federal exclusions of $15,000 per individual — if you receive a gift at or above this amount you will need to report it to the IRS. While you won’t pay tax on the specified amount, the gift will reduce your lifetime exemption of $11.18 million.

Tax Consulting Services in Cedar City, Utah

There’s no reason to stress out about receiving a gift or inheritance. If you have questions about reporting a gift over $15,000 to the Internal Revenue Service, AA Tax & Accounting Services can help you navigate the process and walk you through everything you need to know.

The AA Tax & Accounting Services team is committed to helping you feel confident come tax season. Contact us to schedule an appointment.

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