Common Questions About U.S. Taxes

Should I see someone about my taxes?

Even if you’re itemizing your deductions, the majority of people that ask this question in /r/personalfinance are likely capable of filing their taxes themselves. Tax situations that may merit seeing a professional would be a small business, multiple state residencies/income, or overseas tax issues (foreign tax credit, foreign earned income exclusion). Tax preparation costs vary based on complexity and where you live, but most tax returns can be prepared by a professional for a few hundred dollars.

What tax software should I use?

TurboTax and TaxACT are the two most popular commercial suites. If your income is below $58,000 you can file your federal return for free directly with the IRS using freefile. Costs of state returns through the Turbotax and TaxACT cost $36.99 and $17.99, respectively. Both suites charge more for things like capital gains, rental income, etc.

I already filed my taxes. Can I still contribute to a Roth IRA?

Yes. Unless you’re eligible for the saver’s credit then your Roth contribution after you file your return but before the April 15 deadline will not affect your tax filing. Roth contributions are post-tax.

Why doesn’t the student loan interest deduction double for couples married filing jointly?

That’s just the way the tax code was written. The maximum you can deduct in student loan interest is $2,500 regardless of your filing status.

What’s the difference between a tax deduction and a tax credit?

Tax deductions reduce the amount of your income that is taxed, while tax credits reduce your tax burden directly. The amount your tax burden is reduced by a deduction is the amount of the deduction times your marginal tax rate. For example, a tax deduction of $1,000 for someone in the 25% tax bracket will save $250 on their overall tax burden. A tax credit of $1,000 will save $1,000 on their overall tax burden.

Can I claim so-and-so as a dependent?

Use this handy flow chart, fill out the IRS’s handy tool, or refer directly to IRS publication 501.

I screwed up a tax return for a previous tax year. What should I do?

You need to file an amended return, form 1040X. The IRS provides this guidance for filing amended returns. As the IRS notes, your state tax obligation may change based on your federal tax obligation. You may need to file an amended state return as well.

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