Basics Of Property Taxes
July 12, 2010 by Taxcut Editor
Filed under Personal and Business Taxes
Many people pay there property taxes in the tax year and claim there taxes on their income taxes for that year. For example, the year 2007, you receive your property tax bill in December and pay the tax immediately. You may then claim the property taxes on your tax. If your wait until January of 2008, you will have to claim the property taxes for 2008. There are numerous reasons for paying your taxes straight away and there are reasons for waiting till the next year. Deciding when to pay your taxes could be define by brooding about your current tax liability.
If you are in a higher tax bracket in 2008 than you are in 2007, you might like to wait and pay your property taxes in Jan of 2008. This will help lower your total tax liability in 2008. If you are in a higher tax bracket for 2007 and expect to drop into a lower tax bracket in 2008, you may wish to pay your property taxes in December of 2007 so you can claim it on your income taxes to reduce the tax liability for 2007. Other reasons to attend or pay your taxes also can include other refunds you might or might not have in a stipulated year.
Everybody has different circumstances for having to pay property taxes in a stated year. If you often pay your property taxes with a tax return, you need to make sure that you receive the money before the deadline established by your community. If you fail to pay the taxes on time, you may face a penalty and some interest fees. This is so even if you miss it by one or two days. It is always wise to have an escrow account either established by your mortgage lender or one you have yourself in the bank.
When you pay your property taxes, you should make sure to receive a receipt. This is needed for your tax records as well as showing proof of payment if the community would ever say you still owe money on your taxes. After paying your property tax bill, you can then claim it on that year’s tax return.
Individuals who are lower income and can sign up for a homestead credit will need a copy of the tax demand to send to the state agency that handles the homestead credit. If two people are on the tax bill and only one is claiming the homestead credit, that person does need to meet the requirements for total income. There are numerous guiding principles to follow for this sort of filing. You can submit a homestead credit request even if you did not pay the property tax for the tax year you are claiming. This stated on the homestead form itself.
Now, this may be different for every state, therefore you need to read your homestead form very closely. Some states may require that the property tax is paid and some may not require proof of payment.
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Your Tax Bracket Finding your tax bracket, and understanding it
November 12, 2009 by taxman
Filed under IRS News Items
- 2009 tax rate schedules (returns filed in 2010)
- 2008 tax rate schedules (returns filed in 2009)
- 2007 tax rate schedules (returns filed in 2008)
Your tax bracket can be used to estimate the amount of additional tax you’ll pay if your income increases — or the amount you’ll save if you can claim a deduction. If you’re in the 25% tax bracket you can expect to pay about $250 additional tax if you have $1,000 additional taxable income. In the 15% tax bracket, a $200 deduction will save you about $30. Knowing your tax bracket can help you make better tax planning decisions.
Where tax brackets come from
Congress establishes tax rates that apply to different levels of taxable income. Current law provides rates from 10% to 35%. The higher your income, the higher your tax rate.
The range of income where you stay at any particular rate is known as a tax bracket. For a single person in 2008 the rate on taxable income between $32,550 and $78,850 is 25%, so those numbers establish the 25% bracket. If you’re single and your taxable income is between those two numbers, your tax bracket is 25%.
Frequently asked
Here are some of the most frequently asked questions about tax brackets.
- Is my tax bracket established by the amount I earn on the job?
Some people have in mind the general notion that their tax bracket depends on how much they earn as an employee and won’t be affected by other kinds of income. In reality your tax bracket depends on your taxable income, regardless of the source of that income. For example, you can move into a higher tax bracket because of increased interest income or a distribution from a pension plan — or even because of a decrease in your deductions. - Will capital gain or dividend income push my other income into a higher tax bracket?
No, the tax rates apply first to your “ordinary income” (income from sources other than long-term capital gains or qualifying dividends) so these items that are taxed at special rates won’t push your other income into a higher tax bracket. - If my ordinary income puts me in the 15% tax bracket, can I receive an unlimited amount of long-term capital gain at the 0% rate?
No, the 0% rate applies only to the amount of long-term capital gain and dividend income needed to “fill up” the 15% tax bracket. For example, if your ordinary income is $4,000 below the figure that would put you in the 25% bracket and you have a $10,000 long-term capital gain, you’ll pay 0% on $4,000 of your capital gain and 15% on the rest. - Will my overall tax go up sharply when my income reaches the point where I’m in the next tax bracket?
No, there’s no reason to be concerned about this possibility. When you reach a higher tax bracket, any additional income will be taxed at the higher rate, but the income required to reach that level is still taxed at the lower rates. For example, if your taxable income is just $100 above the limit on the 15% bracket, the last $100 dollars will fall in the 25% bracket and will cause your tax to increase by $25, but won’t affect the tax you pay on all your other income. - Can I determine my tax bracket by looking at the withholding rate on my paystub?
No, Withholding rates are based on averages, not specific tax brackets. For example, your withholding rate may be about 20%, even though there’s no tax bracket between 15% and 25%.
- Are tax brackets the same as marginal rates?
Not exactly. In some cases the added tax you pay when your income goes up isn’t the same as your tax bracket. That’s because the added income can cause you to lose some other tax benefit. For example, added income can mean smaller itemized deductions or a reduction in the amount you claim for your exemptions. You may find that $1,000 of added income causes your tax to go up by $292 even though you’re in the 28% bracket. Your tax bracket is just an approximation of the added tax. To be more precise, we would say you have an effective marginal rate of 29.2%. In most cases, the tax bracket is close enough to the effective marginal rate for purposes of tax planning.
Finding your tax bracket
Finding your tax bracket involves two steps. First, determine your taxable income for the relevant year. Then look that number up in the relevant tax rate schedule.
Tip: If you use tax software to prepare your returns, check to see if it will generate a report that includes information about your tax bracket.
Taxable Income
You can find your taxable income for a previous year by looking at your tax return. It’s clearly labeled — but not very conspicuous. Just look for the words “taxable income.”
If you need to estimate your taxable income for a year in the future, usually the best way to start is to know your taxable income for the most recent year. Then make adjustments for changes you might anticipate: increases or decreases in income or deductions, and perhaps a change in filing status.
Tax Rate Schedules
Once you know your taxable income and filing status, you need to look it up in the appropriate tax rate schedule. This is not the same as the tax tablesyou use to look up your tax! Those tables give you dollar amounts but not tax rates. What you want is a schedule that tells you the tax rate as a percentage for your level of taxable income.
The IRS publishes tax rate schedules in the instructions for Form 1040, and also for 1040-ES (the form used to pay estimated tax) — but not in the instructions for Forms 1040A or 1040EZ. Current tax rate schedules for every filing status can be found by calling our firm (877) 530-6505 .
Here’s a sample tax rate schedule: the 2008 tax rate schedule for single filers.
|
Single |
||||
| Taxable income is over | But not over | The tax is | Plus | Of the amount over |
| $0 | 8,025 | $0.00 | 10% | $0 |
| 8,025 | 32,550 | 802.50 | 15% | 8,025 |
| 32,550 | 78,850 | 4,481.25 | 25% | 32,550 |
| 78,850 | 164,550 | 16,056.25 | 28% | 78,850 |
| 164,550 | 357,700 | 40,052.25 | 33% | 164,550 |
| 357,700 | 103,791.75 | 35% | 357,700 | |
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Tax Tips for Recently Married Taxpayers
July 15, 2009 by Taxcut Editor
Filed under IRS News Items
If you have recently gotten married or plan to get married in the near future, the IRS has some tips to help you avoid stress at tax time.
Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and SSN will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security card at your local SSA office. The form is available on SSA’s Web site at www.socialsecurity.gov, by calling 800-772-1213 or at local offices.
Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from the IRS website IRS.gov or order it by calling 800–TAX–FORM (800–829–3676).
Notify the U.S. Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.
Notify Your Employer Report any name and address changes to your employer(s) to ensure receipt of your Form W-2, Wage and Tax Statement after the end of the year.
Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee’s Withholding Allowance Certificate you can print out and give it to your employer so they can withhold the correct amount from your pay.
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Marriage and Taxes
June 24, 2009 by Taxcut Editor
Filed under Personal and Business Taxes
Getting married is the greatest day for 50 percent of couples. The other 50 percent get divorced. Perhaps the marriage tax penalty has something to do with it.
Family Values? Hardly….
For all the chatter from politicians about family values, it is ironic that the tax code actually penalizes people for getting married. At its heart, the tax code is designed to modify behavior. Deductions and credits are given in areas the politicians wish to promote and taken away in areas considered less positive. Home ownership is viewed as a good thing, so mortgage interest is deductible. Cigarettes are bad, so they are taxed like no tomorrow. If you buy this argument, one must wonder why married couples suffer under the tax code.
A recent study found that by getting married, couples are forced to pay roughly $1,500 in additional taxes. Known as the marriage penalty, one must wonder what the government is up to. Is it trying to promote family values or not? The numbers would seem to indicate not.
The marriage penalty is a nasty little development for newlyweds. The penalty occurs because married couples must pool their earnings when they report taxes. Typically, this means their pooled earnings move them into a higher tax bracket and they pay more taxes. For instance, assume husband makes $45,000 a year as does wife. As a married couple, their pooled income is $90,000 with the accompanying tax consequences. For really doomed couples, the combined income will actually kick in the alternative minimum tax. The AMT more or less voids many major deductions. In the tax industry, there is a nickname for this situation – dash the divorce tax.
The marriage penalty has existed for years, yet the politicians have failed to find a fix. They pay lip service to the idea, but no major changes have been made to fix the problem. The best they have come up with is doubling the standard deduction for married couples, but this has had little impact since most couples itemize their deductions.
It appears the marriage tax penalty is here to stay for the foreseeable future. One has to wonder why our family values President didn’t include a fix in his tax cuts.
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Tax Deductions in Obama’s Stimulus Package of 2009 – Top 10 Tax Deductions in a Federal Package
June 16, 2009 by Taxcut Editor
Filed under IRS News Items
President Obama has signed a stimulus package 2009 which aims at lifting the economy out of recession and intends to create millions of job. The government has revealed several credits, breaks and deductions in order to lift the consumer mood and boost the US economy.
This federal package is really beneficial for the self employed people who are looking for great results. Here are top 10 tax deductions in federal package:
1. The most important tip is to maintain a proper record of file that contains all business expenses. By maintaining these records, you will be able to reduce taxation.
2. You may be able to claim a tax credit for your childcare. The deductions are allowed in federal package for care provided during business hours so that you can look over to your work. These may help you to save a lot of money so do not overlook at it.
3. Make a health saving account which can deduct your contributions to the account and you do not have to pay any tariff on the interest you earn from the account. You may also be able to subtract the medical expenses, if any of your family members is an official employee.
4. Appoint a professional person who will surely help you in getting tariff rebate help and get the correct needs for you.
5. The expenses can also be deducted for education requirements. You are allowed to deduct $ 4,000 for tuition related expenses every year.
6. Student loans interest can be deducted up to $2,500 per year and you may be able to avail this opportunity lifetime. But there are limit of amount for a single person or couple. If the income of a single person is $ 65,000 per annum and $ 1,35,000 for married couple you are able to deduct the tax.
7. Self employed people are allowed to change their billing, if they are in a higher tax bracket; this will help you to save your earnings.
8. There is been a great news for people who stay in states where there is no tax charges. These states are Alaska, Florida, Washington, South Dakota, new Hampshire and many more which able you to pay no general or sales taxes.
9. It can be deducted if you have a retirement plan for your future. This would help self employed people to save money for the purpose of money and get the deferred tax option.
10. The federal package allows you to deduct the mortgage interest that you pay on a loan secured by your home. You are allowed to remove any kind of real estate which is not used for business purposes
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