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At Oldfather Financial, we provide tax analysis for our clients each year. This will help us on any tax strategy to work with their tax preparer with.
The first area to review is the Income Section, which lists all sources of income. The most common method of reporting is a W-2 form. This included wages, Social Security, dividends, self-employment income, rental income and capital gains.
Next the Adjusted Gross Income (AGI) is calculated. Your AGI is calculated by adding up all forms of income and subtracting your deductions. Tax deductions can vary but typical examples include contributions to retirement savings plan, HSA, self-employment tax, and self-employed health insurance.
Now we calculate the amount of taxable income by subtracting these deductions from the AGI. Then it's time to decide whether to take the standard or itemized deduction. The difference between the standard deduction and itemized deduction comes down to simple math. The standard deduction lowers your income by one fixed amount. On the other hand, itemized deductions are made up of a list of eligible expenses. Some of these include, large charitable contributions, state and local taxes (up to $10,000), large medical expenses, or mortgage interest on your home.
The total tax is based up ordinary income tax, capital gains tax and other taxes. By analyzing our clients tax returns, we can strategize for the next year and take actions to help their tax situation. If you are interested in learning more, contact us.