Three Tax Tips for Married Same-Sex Couples

Since 2013 the Internal Revenue Service (IRS) has finally started to recognize marriage between same-sex marriages under certain legal conditions. The marriage had to be valid legally and after 2015 it was legalized in all states. Same-sex marriages are now held to the same tax standard as any other couple.

Understand the Rules of Your State

Even though federal law has allowed for same-sex marriage, many individual states still deny statutory benefits of legal marriage to same-sex couples. It’s important to determine what additional rules there might be for your state from your tax department.

Determine Your Filing Status 

Married couples have the ability to file either jointly or separately depending on their financial circumstances. Which one they file for is up to the couple, but they may reap the same tax benefits as any other married relationship. The status of married filing jointly often allows for a lower rate of taxes. Married filing separately can sometime have drawbacks, and if there are any children involved in the relationship they may only be financially claimed by one parent.

Calculating Results

In some cases, it may be worth filing separately instead of filing together. This all depends on the financial situation of the couple. It’s worth the effort to calculate the tax return under both conditions.

Conclusion

Same-sex couples have achieved a significant step forward in the last few years. With the ability to file separately or together, the same-sex newlyweds are now in further control of their finances. Use your newly accessible filing status to the advantage of your family.

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How Taxes Have Evolved Over the Years

The history of taxes in the United States began with the protest against British taxation without representation. Tax issues have significantly changed since this time period. However, they have always played a vital part in shaping our country.

Taxes in Colonial Times

The tax issue during colonial times was not about the amount of tax being collected, but whether the British parliament had the right to collect taxes while American colonists were not present in government. The Stamp Act and Tea Act were some of the taxes imposed that led to the Boston Tea Party.

The Start of Tariffs and Income Tax

Tariffs have played various roles in the trade policies and general economic history of the United States. Tariffs remained the largest source of federal income until World War I; after World War I income from tariffs was surpassed by income taxes. Income taxes began in the 19^th century in order to help fund the war effort.

Modern Income Tax

Our modern version of the income tax has changed greatly due to different economic events. In 1916 congress readopted income tax; in 1918 top marginal income tax was increased to 77%; and during the Great Depression the marginal tax was increased to 63%. In 1991 the Bush administration made a deal with congress to 31% while the Clinton administration raised the marginal rate to 39.6%.

Conclusion

Taxes have always varied with the changing circumstances of American society. They have evolved and grown, but they have always been used to aid the public. Our economy is forever changing and growing and so are our tax rates.

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How to Avoid Capital Gains Taxes

Incurring taxes on your capital gains can seem pointless and infuriating to those that put time toward their investments. There are many ways to avoid the tax when investing, but none are necessarily beneficial to society or the economy.

Excluding Your Residence

Individual investors can exclude up to $250,000 in capital gains from the sale of their home. This location has to be the investor’s primary residence. Investors who stay in the same area for long periods of time suffer a tax that is best avoid. Moving frequently can help you to avoid the capital gains tax.

Home Renovations

Investors involved in flipping houses make their purchases their primary residences while they work on flipping the house. After renovations have been completed, the individual will sell their house for a higher price, avoiding any capital gains. Selling your primary home can be done if the housekeeper has lived there during two of the last five years.

Stock Exchange

Investors with an appreciation for risk and reward may prefer to invest within the stock exchange. Trading stocks in the daily market or over long periods of time can acquire serious value. Services can offer investors with a diversified portfolio which can help investors avoid the larger capital gains taxes which stock investments usually bring.

Conclusion

Avoiding capital gains when investing can be a tricky and complicated experience. Make sure to research all the different possible ways that you can avoid losing a majority of your investments to the capital gains taxes.

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3 Tips for Claiming Summer Camp Expenses on Your Taxes

When sending a child to summer camp, you may qualify for the child and dependent care tax credit. This tax credit provides a break for many parents who wish to have assistance taking care of their children while working or looking for work.

Learn About Care Credits

Care credits work to assist parents with the expenses of raising a family. The money received varies in relation to the parent’s income. With one child or dependent, the taxpayer is qualified for a tax credit of up to $3,000, with two or more dependents $6,000.

Find Out If You Qualify

Some of the qualifying factors for the care credit are: being the main caretaker, the child must be under 13 years old or disabled, and the caretaker cannot be a parent of the child. Research what qualifying factors you can fulfill when considering the child and dependent care credit.

Discover What Types of Camps Qualify

Determining a summer camp for your dependent should involve seeing if the camp qualifies for the care credit. Even if the program is a sports camp it can still qualify if the time occurs when the parent is at work or in search for work. Camps where kids stay overnight do not qualify toward the tax credit.

Conclusion

When worried about the cost of summer camp, remember the tax breaks involved with the child and dependent care credit. Using this credit can help to increase your refund and give you money to spend on other childcare expenses.

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The Hidden Tax Break in Your 401k

Planning for retirement can seem a bit complicated given the numerous elements involved – pensions, IRAs, and 401(k). Many taxpayers feel unsure about which retirement plan is best suited for them. In this article, we will discuss the tax benefits your 401(k) plan can bring you. This information may help you decide the best route for your retirement.

What is a 401(k)?

A 401(k) is an employer-sponsored retirement plan. Money from your paycheck is contributed towards your account with pre-tax money. This means that you won’t be taxed on the income put into your account the year you are paid for it.

How Much Can I Contribute?

In 2015, employees were allowed to contribute up to $18,000 of pre-tax income to their 401(k). This amount is around $12,000 more than those who own both a traditional or Roth IRA account. Employees can put in double the amount of money over those with IRA accounts because taxes aren’t paid on the money until the taxpayer is 59 ½ years old.

Early Distribution

Withdrawing before the required age will leave a 10% penalty on your account, taking a good chunk of money out of your 401k. If the taxpayer retires or is fired from their job after the age of 55 they are allowed to dip into their 401(k) fund without the penalty.

Closing Thoughts

When the contributions of your 401(k) are paid through pre-tax capital, your employer will not include these figures in your taxable revenue for the year. Your 401(k) not only reduces your income tax but also increases your take-home pay since your chargeable income is less than your actual salary.

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How Society Combats Corporate Tax Avoidance

Tax avoidance is using legally permitted measures to pay the lowest amount of money possible. Avoidance is different than tax evasion. Tax evasion involves a corporation resorting to illegal activities to pay fewer taxes. Tax avoidance causes governments to lose over $170 billion in lost revenue each year, but what’s being done against this?

What Does Tax Avoidance Involve?

Although tax avoidance involves legal actions, public opinion sees such avoidance as unethical. Corporations which take part in tax avoidance receive backlash from once loyal customers and user communities online. Methods of tax avoidance include manipulating the company’s country of residence, legal entities, tax shelters, or transfer mispricing. Both tax evasion and some forms of tax avoidance can be seen as tax noncompliance.

What Is Being Done?

Since tax avoidance greatly reduces government revenue, many countries are framing tax rules to lessen the scope of avoidance. Australia, Canada, New Zealand, South Africa and Norway are just some of the countries to introduce the “General Anti-Avoidance Rules” also known as GAAR. In the United States, the Internal Revenue Service (IRS) helps determine which corporate schemes are abusing the system. US Court case Gregory v. Helvering helped to establish judicial doctrines which assist in this area.

Final Thoughts

Tax avoidance is considered by the public as dodging one’s obligations toward society. When big corporations perform tax avoidances, it is the citizens who suffer the consequences. In the last few years, there has been an increased government response to avoidances and this will only continue to grow in the future.

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What Types of Fees can Freelancers Write-Off as Business Expenses?

One of the benefits of working for yourself is that you can write-off expenses which you would not ordinarily be able to write-off. Things which would otherwise typically be categorized as a luxury item wind up not being a burden. In this article we will cover the types of things freelancers can write-off on your taxes as a business expense.

Equipment Related To Running Your Business

As a freelancer, you can usually write-off equipment that you purchase to run your business. You can usually write-off the cost of your computer, your internet service, your phone service, and your phone itself. If you make clothes, you could write-off the purchase of your sewing machine and fabric. If you use your car in your business, you can write-off your mileage.

Service Provider Fees

You can also write-off the fees you pay to service provider who confer benefits to your business. For instance, as a freelancer you can write-off fees that you pay to your attorney and your accountant.

Educational Fees

You can deduct fees for training. This includes seminars, workshops, books, and DVDs that you purchase to help you stay on top of your field.

Home Office Deduction

You can also take a tax deduction for the portion of your home that you use for your business. This section of your home can only be used for business if you plan to take this deduction.

Running your own business from home can be challenging. You do have to invest a certain amount of money up front. These deductions can help put some of that money back in your pocket.

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Simplifying the Protecting Americans from the Tax Hikes Act into Layman’s Terms

New tax laws are added every year. These things don’t always make the nightly news. Here are a few pieces of information which will help you understand the newly signed Protecting Americans from the Tax Hikes Act.

Tax Credits Extended

Under this new act, tax credits that were scheduled to expire have been extended. Some of these include the deduction school teachers receive for supplies they purchase during the school year. The American Opportunity Tax Credit was extended. The Enhanced Earned Income Credit was also an extended under this act.

Taxpayers can make tax free distributions from their IRA accounts. This applies after the taxpayer has reached the age of 70 ½. Taxpayers can contribute up to $100,000 a year.

Healthcare Provisions Paused

A moratorium was placed on certain parts of the healthcare act. The moratorium was placed on the excise tax associated with certain medical devices and the excise tax associated with certain high cost healthcare plans.

Changes to Individual Taxpayer Identification Numbers

Individual Taxpayer Identification Numbers (ITINS) are issued to people that need to file a tax return but do not qualify for a social security number. Under the old rule, ITINs would expire after they hadn’t been used for five years. What has changed is that if the taxpayer’s number was issued prior to January 1, 2013, the number will expire on a staggered schedule. If the taxpayer’s number was issued after December 31, 2012, the number will expire if it is not used on a return in three years.

Changes in tax laws can be beneficial. Some of these changes will help you get more money when tax time comes. Check with your tax professional or accountant to see how these new rules will affect you during the next tax season.

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What Tax Provisions Are Available with Enrollment in Obamacare?

There is a whole host of tax provisions which can be taken advantage of with enrollment in Obamacare. This article highlights a number of them.

Main Obamacare Tax Provisions

The tax provisions you receive through enrollment with Obamacare apply to all individuals who are employed but do not receive coverage through their employer’s healthcare plan and to individuals who are self-employed. These provisions include:

• 0.9% Additional Medicare Tax

The tax applies to an individual’s wages (and self-employment income) which exceed $250,000 for joint married couples, $125,000 for separately filed married couples, and $200,000 for taxpayers who are not married.

• Adoption Credit

If you adopted a child, Obamacare raised the maximum credit you can claim per adopted child.

• Healthcare Coverage for Older Children

Any health coverage provided by an employer for an individual’s child is not tax-free if the child is under the age of 27 years old. It applies to several workplace and retiree health plans.

• Flexible Spending Health Arrangements

You are eligible to use a Health Savings Account through Obamacare. However, you cannot use the account for over-the-counter drugs or other expenses not considered medically necessary.

• Medical Expense Deductions

You can claim your medical expenses as deductions. Expenses can only be deducted if they are not covered by your insurance and reach 10 percent of your adjusted gross income.

Other Provisions

Other provisions include the Medicare Part D Gap Coverage for prescription drugs, the NIIT Provision, and the Premium Tax Credit Provision.

To learn more about these provision visit irs.gov.

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How does the Cash Payment Option for Taxes Work?

If you are unable to pay your taxes through any other form of currency other than cash, it is important for you to know that the Internal Revenue Service is now providing services for cash-only taxpayers. The IRS is working in coordination with companies, such as ACI Worldwide, the PayNearMe Company, and 7-Eleven in order to provide this option.

How It Works

Taxpayers interested in paying their taxes with cash, need to visit the IRS’s official website and select the cash option button in the “other ways” section of website’s payments page. From there, they will receive an official email from OfficialPayments.com to confirm their information.

Once the taxpayer responds and all information is verified, PayNearMe sends an email link with a payment code and instructions on how to use that code to pay for taxes. This code can be printed or sent to a taxpayer’s smartphone along with a list of 7-Eleven stores which participate in the Cash Payment Option program. All taxpayers are provided with a receipt once the transaction is completed. Payment is usually processed by the IRS within two business days.

In addition, taxpayers participating in this program can only pay up to $1,000 per day, and are subject to $3.99 service charge for each transaction that they make.

Using the Option

If you are considering using this option to pay your taxes, start the process well in advance of your tax payment deadline. The option is a three-step process and the IRS encourages early enrollment.

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