Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world. Follow @DanCaplinger Follow @DanCaplinger
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When most people think of tax preparation, what comes to mind is filing a 1040 before the middle of April. However, there is much more to it than that. There is no reason every individual should not have their own tax strategy customized to fit their specific needs. A reduction in taxes can benefit individuals with retirement income, gifts received, estates and more. Franklin P. Sparkman specializes in maximizing tax deductions for individuals and their families.
Tax credits are extremely valuable breaks for taxpayers. Credits lead to a greater reduction in tax than deductions because they are directly applied to your tax bill in a dollar-for-dollar manner. For instance, a $1,000 credit would cut your tax bill by $1,000, but a $1,000 deduction would reduce your taxes by less than $1,000 -- more specifically, typically somewhere between $100 and $370 under current tax law. In particular, the following tax credits are among the most common and can produce significant savings.
Finally, a few aspects of gift and estate tax planning will see some changes in 2019. The federal estate tax lifetime exclusion amount will rise to $11.58 million in 2020, up from $11.4 million in 2019. However, annual gift tax exclusion amounts of $15,000 remain in place and unchanged for 2020, and the traditional exemptions from gift and estate tax -- including transfers to spouses and charities as well as amounts paid toward educational or medical costs -- are also still available.
An accounting information system is a part of an organization's information system that focuses on processing accounting data. Many corporations use artificial intelligence-based information systems. Banking and finance industry is using AI as fraud detection. Retail industry is using AI for customer services. AI is also used in cybersecurity industry. It involves computer hardware and software systems and using statistics and modeling.
The total sum of state and local income taxes, real estate taxes, and personal property taxes (such as car registration fees) up to $10,000, or $5,000 if you're married and file a separate return. You can substitute sales taxes you paid for income taxes if this is more beneficial for you, but you cannot include both sales and income taxes—you must choose one or the other.
Tax credits are credited to your IRS as payments, just as though you had written the IRS a check for money owed. Most of them can only reduce your tax debt, but the EITC can result in the IRS issuing a tax refund for any balance left over after your tax obligation has been reduced to zero. Again, income restrictions apply. You won't qualify for this tax credit if you earn too much.
Interest on mortgages taken out after Dec. 15, 2017 of up to $750,000, or $375,000 if you're married filing jointly, or $375,000 if you're married and filing separately, provided that the funds are used to "purchase, construct, or make substantial improvements" to your primary or secondary residence. The maximum amount for mortgages originated on or before December 15, 2017 is $1,000,000, or $500,000 for married filing separately.
Just as managerial accounting helps businesses make decisions about management, cost accounting helps businesses make decisions about costing. Essentially, cost accounting considers all of the costs related to producing a product. Analysts, managers, business owners and accountants use this information to determine what their products should cost. In cost accounting, money is cast as an economic factor in production, whereas in financial accounting, money is considered to be a measure of a company's economic performance.