Tax Planning For New Business

Tax Planning For New Business-62
The flip side is that your AGI will shrink if you have adjustments but no additional sources of income.

You should always take the higher of your standard deduction or your itemized deduction to avoid paying taxes on more income than you have to.

A single taxpayer who has $13,000 in itemized deductions would do better to itemize than to claim the standard deduction.

Adjustments are deductions, but you don't have to itemize to claim them.

Instead, you take them on Schedule 1 of your 1040, and the total of Schedule 1 can reduce—or even increase your adjusted gross income.

Conversely, you'll pay less in taxes if you earn less.

That's the way the American tax system is set up. Your AGI is your income from all sources minus any adjustments to income you might qualify for.

The Tax Cuts and Jobs Act (TCJA) upended tax rules to a significant extent when it went into effect in 2018.

The Internal Revenue Code used to provide for personal exemptions that could further decrease your taxable income, but the TCJA eliminated these exemptions from the tax code.

You won't be able to qualify for certain tax credits if it's too high.

Your AGI can even impact your financial life outside of taxes: Banks, mortgage lenders, and college financial aid programs all routinely ask for your adjusted gross income. The more money you make, the higher your AGI will be and the more you'll pay in taxes.

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