Tax relief refers to any program that allows individuals or even businesses to reduce the tax they have to pay, given special circumstances.
Considering the world’s current situation, tax relief is even more critical than before as it’s hard to find a job or continue working with the COVID-19 pandemic going on.
However, qualifying for tax relief is not easy, and you have to know what your options are and make your choice from there. Below are four different tax relief options that can save you a lot of money:
1. Offers in Compromise (OIC)
An offer in compromise is an agreement that happens when the Internal Revenue Service (IRS) decides to reduce the tax required of a taxpayer. There’s no fixed amount on how much you can save as tax relief through OICs, but it’s usually a significant amount.
The IRS only accepts OIC under strict conditions, so it’s quite a difficult option for tax relief. Moreover, sometimes there’s an application fee for OIC, but only if you’re applying as a business and not as an individual.
It’s worth mentioning that the IRS approves less than half of the applications it receives, so there’s no guarantee that you’ll qualify for an OIC. However, you can increase your chances by looking for tax relief services, especially if the company has a record of successful OIC testimonies.
You should also remember that those with low income aren’t the only ones qualified to get tax relief. The IRS looks at an individual’s or a business’s assets as well.
2. Ownership Benefits
Homeowners can enjoy several tax benefits. For starters, homeowners’ imputed rental income is not eligible for taxation, which means the money that would’ve been spent for tax will be saved, so it’s more like tax exemption rather than relief.
You should also know that if you’re currently paying for a mortgage, the IRS can deduct the interest from any tax involved in the property, allowing you to combine the cost altogether, effectively saving you money. Another case of ownership benefit is that you can exclude part of the profit of the sale from taxation upon selling your house.
To sum it up, homeowners will enjoy the following benefits:
- Non-taxable imputed rental income
- Deduction of mortgage interest
- Non-taxable home sales
Perhaps this is the reason real estate is a thriving industry. Agents are not the only ones profiting from the commission. Homeowners also benefit from tax relief.
3. Investors’ Relief
Surely, most investors know that they must pay a certain amount of money when disposing of an asset, which is what they call Capital Gains Tax (CGT). Investors’ relief is basically relief for this kind of tax, which allows you to reduce what you have to pay. Usually, an investor must pay 10% of the profit from disposing of an asset, but one can reduce that amount.
To qualify for investors’ relief, the shares or assets you’re trying to dispose of are subscribed for using cash. The owner must also hold the assets for three years.
4. Charity Tax Deductions
Besides assets and your income, you can also qualify for tax relief, depending on what you do for a living. For instance, companies that do charity may enjoy tax deductions if they itemize their contributions to charity. For your reference, itemized deductions refer to expenses that can reduce the amount of tax a business or an individual must pay.
Simply put, as long as you’re doing charity work, you can itemize deductions which can be up to 100% of your gross income, but the most common is 50% deduction.
Anyone would naturally want to earn money without much effort, and saving money is basically making money. Hence, qualifying for tax relief is something that many people look forward to. Unfortunately, it’s not as easy as people think. However, with this guide, you can increase your chances of getting tax relief from the IRS.