Preparing taxes manually can be a tedious and confusing task that often leads to expensive errors. For many Americans, utilizing commercial tax software helps streamline the filing process. If you are an individual planning to file online, you might be wondering if Intuit’s TurboTax is the right solution for your needs. Here is what you should know about this desktop software.
If you prefer a hands-on approach, a financial advisor who focuses on tax planning can help you build a strategy for optimizing your taxes.
For TurboTax, as with all tax software, you can start with a no-frills version for free. The TurboTax free edition is a clean, easy-to-use program that can handle W-2 income with the standard deduction, simple investment yields and above-the-line deductions.
For most taxpayers, this is more than enough. If your income comes solely from employment, meaning you receive a W-2, and you plan to take the standard deduction, you likely do not have complex tax issues to maximize. You can use the free version of the software, which is accessible directly on the TurboTax website.
However, TurboTax also provides downloadable desktop software that includes five federal e-files. There are three levels of this desktop software: Deluxe, Premier and Home & Business. We will be exploring the first two options below.
TurboTax Deluxe is a product separate from the strictly online options featured on the company’s homepage. Deluxe costs $80, though it is often discounted to $70 on the website. This package includes five federal e-files and one state download. You can e-file state returns using Deluxe for an additional $25 per return, or purchase extra state returns for $40 if you need to file in multiple jurisdictions.
Similar to the free online edition, Deluxe features a clean, user-friendly layout. The software is well-designed with a conversational tone. It <a href="https://shoppixy.com/best-toilet-bowl-cleaner-buying-guide/” title=”Best Toilet-Bowl Cleaner Buying Guide”>guides you by asking specific questions about your finances and spending, then explains how those factors impact your taxes and deductions. For users who are not well-versed in tax law, this is a highly effective design.
While it will not eliminate the tedious work of gathering your receipts, paperwork and financial records, TurboTax Deluxe is helpful for identifying which numbers you need and where to locate them.
The Deluxe edition is designed to calculate more than 350 line-item tax credits and deductions. While the free online edition is limited to the standard deduction and above-the-line credits, TurboTax Deluxe allows you to claim itemized deductions and below-the-line credits.
This is the ideal choice for taxpayers who earn income through W-2 employment but choose to itemize their taxes rather than taking the standard deduction.
TurboTax Deluxe is particularly useful if you own a home, have significant educational or medical expenses, or made substantial charitable contributions. For instance, the common mortgage interest deduction is a below-the-line option, meaning you must itemize your taxes to claim it.
However, Deluxe is not the best option for taxpayers with complicated investment income, rental income or those who are self-employed. If those situations apply to you, TurboTax Premier may be a better fit.
TurboTax Premier is the next tier up from Deluxe. It costs $115, with a website discount often bringing it to $105 for a federal filing. Like Deluxe, it includes five federal e-files and one state download. State returns can be e-filed for an additional $25 each, and you can purchase extra state returns for $40 if you need to file in more than one state.
Premier shares the same design strengths as TurboTax Deluxe. The software maintains a conversational flow that asks for your information and explains the significance of that data as you enter it. This approach is both accessible and useful.
Get a quick estimate of your tax situation before choosing tax software by using our income tax calculator.
TurboTax Premier includes all the features of TurboTax Deluxe, allowing you to itemize your taxes and claim below-the-line credits. Additionally, it includes the necessary forms to report income, losses, credits and deductions related to investments.
This covers standard securities like stocks, bonds and funds, as well as more complex assets such as cryptocurrency. It also includes investment property, such as rental homes and associated passive income.
This is the right choice for taxpayers with investment income beyond basic interest and dividends. It is also appropriate for those with capital gains or losses, individuals who sold significant property like real estate during the year, or taxpayers with income or losses from passive activities like rental properties.
You will need the forms provided in TurboTax Premier regardless of the size of these gains or losses. The IRS does not offer a de minimis exception for reporting investment income.
The software also provides extra guidance regarding rental property income, expenses and refinancing. Furthermore, it helps you review your tax history and offers tips for maximizing your refund in the following year.
While Premier does support Schedule C for reporting business profits or losses, taxpayers who are self-employed or run their own businesses may find more value in TurboTax Home & Business.
If you own a business with a corporate structure, receive 1099 income, or intend to deduct business expenses, you cannot use investment forms to file those taxes. Premier only provides access to forms for securities, asset sales, investment income and passive activities.
TurboTax offers some of the most popular tax preparation software on the market. You might choose TurboTax Deluxe if you earn W-2 income and plan to itemize your deductions. TurboTax Premier may be the better option if you have investment income or losses.
If you need help managing your taxes, consider working with a financial advisor with tax expertise. Finding a financial advisor does not have to be difficult. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
A financial advisor who specializes in tax planning can help lower your 1099 income taxes by harvesting your losses. This means that you will be able to use your investment losses to reduce taxes on 1099 income.
