Whether you’re a W2 employee or a 1099 contractor, you may be eligible for tax deductions or credits that can help you save on your tax bill.
Tax season is upon us, and we know that everyone is interested in ways to reduce their tax bill. While we’re not financial consultants or tax advisors, we’re sharing information about some of the tax credits and deductions you may be eligible to receive.
Check out these 2021 tax credits and deductions below. As you’ll see, they could make a big difference for your pocketbook.
Child Tax Credit
If you’re a parent, you could receive a tax credit to help offset the cost of raising children. In 2021, the federal Child Tax Credit was raised to $3,600 per child under age 6 and $3,000 per child up to age 17, and advance payments were paid out between July and December. But you can claim the other half on your tax return.
Child and Dependent Care Tax Credit
If you pay someone to care for your children or another dependent while you work, you may qualify for the Child and Dependent Care Tax Credit. Paying for care can be costly, and this credit could be worth up to $4,000 for care for one dependent and up to $8,000 for two or more dependents.
Student Loan Interest Deduction
Are you still paying back student loans - for yourself, your spouse or a child? If so, you could deduct up to $2,500 from your taxable income. Loans can qualify as long as they go toward qualified expenses, including tuition and fees, room and board, books and supplies and other educational necessities.
Medical Expense Deductions
If you’ve been in the hospital or had a costly medical expense that was more than 7.5% of your adjusted gross income (AGI), you may be able to deduct any unreimbursed expenses from your taxes. For example, if your AGI is $40,000, you may be able to deduct medical expenses over $3,000 (7.5% of $40,000). So, if you had $5,000 in medical expenses, $2,000 of it could be deductible.
Recovery Rebate Credit
Remember the stimulus checks provided last year? If you experienced a major life event in 2021, like becoming employed for the first time, losing a job, or having a new baby, it’s possible you didn't get a third stimulus check, or only got a partial one. In these cases, you may be able to claim the Recovery Rebate Credit to make up the difference. For most people, these credits are worth up to $1,400. You can visit IRS Online Account to see if you are eligible based on the amount of your third check.
Charitable Contributions Deduction
Charitable contributions are also deductible. For 2021, you may be able to deduct up to $300 per person from your taxes, without having to itemize. Married couples filing jointly can deduct up to $600.
Another Factor: W-2 or 1099 Employment?
Along with taking advantage of credits and deductions, your upcoming tax bill will also be affected by your type of employment. If you’re working in the healthcare staffing industry, most likely you are working as a W-2 employee or a 1099 contractor. (These “W-2” and “1099” labels reflect the type of tax form you receive in each position).
W2 employees are considered payroll employees. This means the company will withhold federal, state, and Medicare taxes from each paycheck and submit those along with the taxes they’re required to pay as your employer. As a W-2 employee, you may also be eligible for company benefits, such as health and life insurance.
1099 individuals are considered independent contractors or self-employed, which means taxes are not withheld from your pay, and you are responsible for paying both the employee and employer taxes. In this case, you may want to set aside money from each paycheck that will go towards paying your tax bill, or you can make quarterly estimated payments to the IRS or your state throughout the year. Either way, it’s up to you to handle in order to avoid potential underpayment or interest penalties
If you’d sleep better at night knowing you’re paying your taxes as you go, you may want to pursue W-2 employment. At Gale Healthcare, all of our nursing staff are hired as W-2 employees. We withhold taxes, so you don’t have to worry about a large tax bill coming due. We also provide other benefits, including options for health insurance, life insurance - and we provide same day pay.
We’re hiring nursing professionals for flexible work options across the country. If you’d like to join the fastest-growing healthcare staffing firm in the country, click here. Meanwhile, don’t forget to check whether you’re eligible for any of the tax-saving tips outlined above.
The material provided here is informational only. It is not intended to serve as financial, tax or legal advice.