Tag Archives: Tax

What are the Tax Brackets for Married Couples?

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Do you want to know how much money you will be paying in taxes this year? You need to understand tax brackets. Tax brackets are the ranges of income that are taxed at different rates. The higher your income, the higher your tax rate will be. In this blog post, we will discuss how tax brackets work and who pays what!

There are seven tax brackets in the United States: ten percent, fifteen percent, twenty-five percent, thirty-three percent, thirty-seven percent, and forty-seven percent. The first six brackets apply to taxable income (TI). TI is your total income minus any deductions or exemptions. The seventh bracket applies to long-term capital gains and qualified dividends.

Income in the United States is taxed at progressive rates. That means that as your income increases, so does your tax rate. The tax rate for each bracket is applied to the income that falls within that bracket. For example, if you have a taxable income of $50,000, your tax rate would be fifteen percent on the first $37,950 of income, twenty-five percent on the next $12,050 of income, and thirty-seven percent on the remaining $50 of income.

The marginal tax rate is the tax rate you pay on your last dollar of income. In our example above, the marginal tax rate would be thirty-seven percent. The effective tax rate is the average tax rate you pay on all of your income. In our example above, the effective tax rate would be twenty percent.

So, who pays what in taxes? The answer may surprise you! According to the Tax Policy Center, the top one percent of earners (those making over $628,000 per year) pay thirty-seven percent of all federal taxes. The top five percent of earners (those making over $151,000 per year) pay fifty-nine percent of all federal taxes. The bottom ninety-five percent of earners (those making less than $151,000 per year) pay forty-one percent of all federal taxes.

As you can see, the majority of Americans do not shoulder the entire burden of paying taxes. The top earners in our country pay the majority of federal taxes. So, next time you hear someone say that the rich don’t pay their fair share in taxes, you can tell them that they are wrong!

What are the tax brackets married filing jointly?

The tax brackets for married filing jointly are the same as the tax brackets for single filers, except that the income thresholds are doubled. For example, the 15% tax bracket for married couples begins at $19,050, while it begins at $12,700 for single taxpayers. The highest marginal rate of 39.60% applies to taxable incomes over $470,700 for married couples, compared to $418,400 for singles. (These numbers are based on Tax Year 2016.)

How to Prepare for the Tax-Filing Season – Tips for You

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When the tax filing season comes, you need to prepare and submit your tax returns on time. Learn some tips to prepare for tax filing season here.

Introduction

The IRS expects every taxpayer to submit their tax returns and pay what they owe on time. As you know, tax filing is not a simple affair and involves a lot of documentation and calculations. And that is why the IRS gives taxpayers several months to prepare and submit their tax returns. They also allow for an extension period to file taxes to ensure no taxpayer is left behind. If you don’t comply, IRS can impose heavy penalties or even take tax collection enforcement measures against you. To be on the safe side, here are some tips to ensure you are ready on the first day to file taxes.

Gather your documents

Even if you want to hire a tax preparer to prepare and submit your tax returns, you still have some work to do – gather all the documents and receipts required. You can get your W2 form with an online W2 finder to show your income and withheld taxes. If you are in business, you need bank statements and forms 1099 that show your earnings. There are various forms of 1099 such as form 1099-DIV for dividends, form 1099-INT for interest, among others. When it comes to deductions, you need to have receipts to back up your claim. Gather the receipts and determine whether to itemize your deductions or take a standard deduction.

How to Check the Status of Your Tax Refund

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You can check the status of your refund by looking for the ‘Where’s My Refund?’ tool on the IRS website. Follow the instructions given on-screen and you’ll be able to get a status update on the progress of your refund. This tool also works on the IRS’s mobile app IRS2Go.

Let’s take a look at a few examples of the tax refund schedule and when you could expect to receive your refund if you submitted your return during a certain period:

  • Between January 20th to the 24th, you could expect to receive your refund as early as January 31st, as long as you don’t claim the EIC or the Child Tax Credit.
  • Between February 10th to the 14th, you would receive your refund on February 21st.
  • Between March 29th and April 3rd, you would get your refund on April 17th.

These are just three examples of when you may receive your refund if you submitted your tax return on these dates. They’re only predictions and other factors can impact when you actually get your refund.

Additionally, keep in mind, if you use the get my W2 online option and you’re submitting electronically, you should use the date when your return has been ‘accepted’ by the IRS as your submission date. This is typically between one and three days following the day you sent in your return.

For taxpayers who have decided to send their tax returns in paper form, you should assume at least a three- or four-week delay. This is because the IRS needs to manually enter your information into their systems.

This delay could be even longer if the IRS needs to carry out additional checks on your tax return.

All about the Six Schedules of the New Form 1040

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In a bid to simplify the tax filing process for many Americans who have quite a very simple tax affair, the Internal Revenue Service introduced a new and smaller Form 1040. This change saw many of the lines of the previous form moved to six new schedules. What are these new schedules and who are they for? Tax blog, American Tax Service provides answers to all these questions in its latest post.

The first schedule, the Additional Taxes and Adjustments to Income is used to report certain types of additional income or adjustments. This could include, capital gains, wins from gambling, unemployment compensations, etc. Student loan deductions must also be entered into this schedule.

The second schedule is seldom used as it pertains to only a few sets of people who pay the alternative minimum tax (AMT).

Schedule 3 is for Nonrefundable Credits and it applies to all nonrefundable credits apart from the child tax credit, or any other dependency-based tax credits.

Other federal taxes like the self-employment tax, household employment taxes and any additional taxes on your retirement plans can be reported using Schedule 4.

Should you decide to claim certain refundable credits or report any withheld payments, then Schedule 5 will come in handy.

The sixth and last schedule is used only if you have a foreign address. It is mostly used by Americans living and working abroad. This schedule allows a third-party file taxes on your behalf.

The American Tax Service sums up its post by recommending that taxpayers file their taxes online with the H&R Block. The H&R Block is up to date with the latest IRS tax forms and schedules and it helps taxpayers find their w2 form and file their taxes online.

To find out more about the IRS 1040 Form and the six new schedules plus how to get a 35% discount for filing your taxes online with the H&R Block, please visit, https://americantaxservice.org/the-six-new-form-1040-schedules/

Self-Employment Tax – How to File

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There are so many benefits to being self-employed – making money on your own terms, being your own boss and living the life that you dream of. But when it comes to filing your taxes, there is just one little disadvantage to being self-employed and that is if you are already used to filing the regular W-2 forms, there won’t be a need for it any longer. You will need to file self-employment tax forms. So what is the self-employment tax and what are the rates for 2019. A tax information blog, National Tax report has just published a new guide to help self-employed people easily figure out what the self-employed tax is, what the rates are for the tax year 2019, as well as the deductions that can be taken from the self-employment tax.

For the tax year 2019, the self-employment tax rate is set at 15.3% on the first $132,900 of net income. And should the net income exceed $132,900, there will be a charge of 2.9% on the excess. The self-employed tax rate is broken into two parts: Social Security tax and Medicare. Social security takes a majority part of the self-employed tax and is set at 12.4% while Medicare balances it up at 2.9%.

Self-employed taxpayers are expected to pay both the employee and employer parts of these taxes. But they will be able to claim back half of their self-employment tax contributions. One other deduction self-employed taxpayers will find useful is the Self-employed insurance. This offers full deductions on the cost of premiums on medical, dental, and long-term care insurance and can cover the taxpayer’s spouse, dependents including adult children up to the age of 27. Other deductions available to self-employed taxpayers are home office, phone bills, Internet bills, business mileage, and meals.

To file the self-employment tax, taxpayers will need to use the Schedule SE, which is a part of Form 1040. To help determine how much you need to pay in self-employment taxes and how much you’ll be able to claim in credits and deductions, it is best advised to use a self-employed tax calculator from TurboTax. This will ensure you get the most of your tax credit and deductions.

For more information, please read the full post from National Tax Report here, https://nationaltaxreports.com/how-much-will-i-owe-self-employment-taxes/

How Possible is it to Claim the Deduct Mortgage Interest?

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In a new post, the American Tax Service, a tax blog dedicated to educating Americans about the US tax system has revealed all there is to know about the mortgage interest tax breaks. Recent changes to the US tax system by the Tax Cuts and Jobs Act (TCJA) has left so many Americans puzzled as to what they are entitled to or which credits and deductions are still available for them.

One popular deduction which is still very much available to taxpayers is the mortgage interest tax deduction. The post sheds light into this once popular mortgage tax deduction, what has changed about it, and if it is still worth claiming.

Starting from 2018, the TCJA has reduced the principal limit in which interest can be deducted from $1,000,000 to $750,000. For married taxpayers who are filing a separate return, the limit has been scaled down from $500,000 to $375,000. These new changes to the mortgage interest deduction are to last till the 2025 tax year but the limits do not apply to loans from 2017 or before.

The tax blog did put to rest the belief by most Americans that they will not be able to deduct any home equity loan interest with the new tax reforms. As long as the loan is used to improve the home and not used for other personal expenses, taxpayers will be able to deduct the interest. The mortgage deductions will only apply to a taxpayer’s primary residence or second home and will not apply to an investment property. Furthermore, the loan value and the interest deducted can’t be worth more than the initial cost of the home.

Mortgage interest deduction still remains an itemized deduction. So in order to claim it, taxpayers will need to make sure that their standard deduction isn’t worth more than their itemized deductions. But with the TCJA doubling the standard deduction, it is no longer a tough choice to make. This leaves only 30% of American taxpayers itemizing their deductions. And this is expected to drop even further to 5% in the coming years.

To read the original post, please visit https://americantaxservice.org/is-it-possible-to-deduct-mortgage-interest/

How Capital Gains Can Affect Your Tax Bracket

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Capital gain tax is paid on the profit made from selling your own assets. This tax levy is only due after a sale is made or completed. That is, if the value of your asset most likely a property increases, you are not required to pay the capital gain tax but as soon as you sell your asset then you will need to report it in your tax return.

Depending on a number of factors such as your income, other profit gains, and the number of deductions and credits that are available to you, the capital gain tax can affect your tax bracket. Efile Tax Advisor, a tax advisory blog explains in a recent post how capital gains can affect your tax brackets and clears any confusion taxpayers might have about the capital gain tax.

According to the tax blog, taxpayers who are not in the higher income brackets should not expect their capital gains from home sale to push them into a higher tax bracket if they are selling their house below the threshold of $250,000 for single filers or $500,000 for couples. Also, as long as the profit margin is not above the limit, taxpayers really do not need to file with the government.

The blog also offers scenarios where a taxpayer can avoid paying the capital gains tax or reduce it to the barest minimum. Taxpayers can pay little or nothing at all if their property increases in value every year since it was purchased or if their property has not been sold or exchanged in the last 5 years. This implies that there are higher tax rates for short-term capital gains as compared to long-term capital gains. Homeowners who reinvest their capital gains will get no deductions or credit but the gains can be used to fund other income avenues that are taxed at a rate much lower than most personal incomes.

For more information about the capital gain tax, please visit https://efiletaxadvisor.com/2019/05/09/will-capital-gains-put-me-into-a-higher-tax-bracket/

Understanding the Child & Dependent Care Tax Credit

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Childcare is perhaps the steepest monthly expense many families can not shy away from. Parents or custodians are left with no choice than to pay for daycare for their infants or disabled adults under their care. However, families who are struggling to keep up with this ever-increasing bill can get a bit of respite from the IRS according to a recent post by the National Tax Reports. The post sheds light on the child and dependent care tax credit and how taxpayers can take advantage of this credit to cover the cost of their childcare.

The Child and Dependent Care Credit can cover a percentage of daycare costs up to a maximum of $3,000 for one dependent and it is capped at $6,000 for two or more dependents. This percentage can range from 20% to 35% of the taxpayer’s adjusted gross income. National Tax Report recommends using a free dependent online calculator to quickly estimate your credit amount. The online software will only ask simple questions about your family so as to ascertain who qualifies as a dependent on your tax return to help you get the biggest tax return.

There are just a few basic requirements to be met in order to qualify for the child and dependent care tax credit. First off, taxpayers must have a dependent child less than the age of 13 or an older child who is physically or mentally unable to care for himself due to disability. The purpose of paying child care for these dependents must be to allow both parents to work or get a job or attend school on a full-time basis. It is also expected that both parents must have earned income either from a job or through self-employment. The only exception to this is if one of the parents is disabled and incapable of caring for another person.

There are also rules concerning daycare. The person providing the daycare must not be listed as a dependent of the taxpayer. Summer day camps qualify as providers while overnight camps do not qualify. This is because the IRS does not think an overnight camp as a form of work-related expense.

For more information about the Child and Dependent Care Credit, please visit, https://nationaltaxreports.com/eligible-for-child-dependent-care-tax-credit/

Which Home Improvements Qualify for Residential Energy Credits?

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With rising energy cost, it is now a wise choice to invest in home energy efficiency. As it doesn’t just save you energy and money alone, it increases your property’s value and gives you money back in the form of residential energy tax credits for home improvements. Homeowners who are interested in knowing how to take care of the upfront cost with the help of tax breaks on specific home improvement projects will find a new blog post on American Tax Service very resourceful. The post reveals all they need to know about the residential energy tax credits and how they can easily claim it.

According to American Tax Service, there is no better time to consider energy-efficient home improvements than now as most of the energy tax credits decreases in value every year. The Residential Renewable Energy Tax Credits is perhaps one of the most generous energy tax credits and it applies to newly built homes as well as an existing primary or secondary property. Homeowners can claim up to 30% of the overall cost of installing their system including labor cost using this tax credit.

Homeowners who would like to claim the Residential Energy Tax Credit must file Form 5695 with their tax return. They are also expected to provide information regarding the costs of installing their energy-efficient system. The tax credits are nonrefundable, so while it can reduce the tax bill up to zero, it does not offer a tax refund. In addition, the total amount of tax credits can’t exceed the amount of tax owed.

Another energy credit homeowners might also take note of is the non-business energy property tax credit. While this tax credit has expired, there is a possibility it could be renewed by Congress. The American Tax Service recommends using the H&R Block Online Tax to maximize the tax deduction and energy credit that you are eligible for. It offers step by step instruction and ensures that you get the largest refund possible.

For more information about the Residential Energy Credits, please visit, https://americantaxservice.org/home-improvements-qualify-residential-energy-credits/

What Are the Best Tax Credits for Education

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Students who would like to get a bit of respite on the high cost of their education will find a new blog post on American Tax Service very resourceful. The post offers some insight into two of the best educational tax credits available to them in the upcoming tax year. And it seeks to help them make an informed decision on which of the educational tax breaks is best suited to their needs as they cannot use more than one in any given tax year.

The first of the tax credits explained by the American Tax Service is the American Opportunity Credit. To be eligible, the student must be enrolled at least half-time per academic period during the tax year in a school currently participating in the student aid program of the Federal government. Students who are already done with the first four years of schooling are excluded from the scheme as well as students with felony drug convictions. The American Opportunity Credit can be worth as much as $2500 and can be claimed on anything a student needs to attend school including tuition, books, and supplies. It is best suited for undergraduate college students

The other tax credit is the Lifetime Learning Tax Credit. To be eligible, a taxpayer needs to only take a course per year at a school that is enrolled in the Federal student aid program. The credit does not also consider whether it is the first four years of schooling or not. Regardless of how many years you have spent in school, you can qualify for this tax credit. The Lifetime Learning Credit can also be used for anything from tuition to supplies but all supplies must be purchased directly through your school. The Lifetime Learning Credit is worth $2,000. However, it is a nonrefundable tax credit. It is best suited for students in postgraduate programs.

To claim any of the education tax credit, taxpayers must fill in and file Form 8863 with their tax returns. The American Tax service recommends using the H&R Block online tax filing. It will provide the form and easily help calculate exactly how much you are entitled to.

For more information, please read the original blog post by the American Tax Service here, https://americantaxservice.org/best-education-tax-credits/