All the other taxes you pay – Tax Tip of the Week September 30, 2009
Posted by bradstreetblogger in : Tax Tip , add a comment…Continuing last week’s discussion
In the last two weeks we have discussed your federal income tax rates and federal capital gain taxes.
This week we are going to discuss all of the other taxes that fly out of your pocket.
FICA
This is the Social Security and Medicare taxes you pay. If you are an employee, these taxes are withheld from your paychecks and you don’t report them on your tax return. However, it is a 7.65% tax obligation. If you are self-employed, you do pay these taxes on your tax return and since you are paying both the employee and the employer portion of the tax, your rate is 15.3%.
Tax Tip Alert: For 2009, earnings up to $106,800 are subject to Social Security tax. There is no maximum earnings cap on Medicare taxes. As efforts must be made (someday hopefully) to keep Social Security and Medicare solvent, we expect the Social Security cap will increase substantially or possibly even be eliminated over the next several years.
STATE INCOME TAX
Like the federal income tax brackets, Ohio also has a progressive income tax rate that roughly follows the federal tax brackets. The range for 2009 is .618% – 6.24%.
CITY INCOME TAX
Most municipalities around the greater Dayton area have a city income tax. You pay city taxes first where your job or business is located. You may or may not also have a city tax obligation to the city in which you live. City income taxes in this area range from 1%- 2.5%.
SCHOOL DISTRICT (SD) INCOME TAX
Currently, there are only a handful of school districts in this area that have an income tax. You pay this tax based upon the school district in which you reside. This tax ranges from .5% -1%.
Tax Tip Alert: As school districts continue to look for funding beyond relying on property taxes, we expect more districts will try to get an income tax implemented.
Example:
Let’s consider a self-employed individual whose income places them in the highest federal and state income brackets. Let’s then have this taxpayer live and/or work in the highest taxing city and school district and see what their tax liability would be:
35% Fed tax + 15.3% SS tax + 6.24% OH tax + 2.5% city tax + 1% SD tax = 60.04%
And this is only the taxes that appear on a tax return! It doesn’t include sales taxes, property taxes or the many hidden excise taxes that are paid.
Questions about your tax status? In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit www.bradstreetcpas.com.
…until next week.
What you need to know about capital gains … Tax Tip of the Week September 23, 2009
Posted by bradstreetblogger in : Tax Tip, Uncategorized , add a comment…..Continuing last week’s discussion
Last week on the blog we discussed federal income tax brackets and their importance in tax planning. This week we will talk about capital gains.
First, some definitions:
- A capital asset is defined as anything owned for investment purposes. This would include stocks, bonds, mutual funds, a second home, a business, land, art, jewelry, gold, etc.
- The definition of a qualified dividend goes beyond the scope of this article. However, they are stated on the 1099-DIV that you receive from your broker or mutual fund company.
- Long-term gains are any investment/property held for more then one year.
- Short-term gains are any investment/property held for less then one year.
- Taxable gains are determined by:
Proceeds from sale – cost basis = gain/loss
For 2009, and supposedly 2010, capital gains and qualified dividends are taxed at a much lower bracket then the ordinary income brackets we looked at last week.
| Ordinary Income Tax Bracket | 10% | 15% | 25% | 28% | 33% | 35% |
| Long Term Capital Gain | 0% | 0% | 15% | 15% | 15% | 15% |
That’s right, if you are in the 10% or 15% income tax bracket, any long term capital gains or qualified dividends you have this year will have no tax liability. The tax savings are also significant for long term capital gains and qualified dividends reported by those in the higher tax brackets.
Cautions:
- These reduced rates do not apply to any short term capital gains or regular dividends.
- If you are trying to maximize the amount of zero capital gain tax you must be careful not to sell off too many assets that will move you into the 25% marginal tax rate bracket.
- Collectibles (art, jewelry gold) are taxed at rates ranging from 10% – 28% depending on your tax bracket.
These reduced tax rates offer some tremendous tax reduction strategies. But act soon, we don’t think this tax break will last long.
Next week, we will discuss the other taxes that make up your total tax liability for the year.
Give us a cal anytime with any questions you may have.
In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit www.bradstreetcpas.com.
…until next week.
Question: Do you know your tax bracket? Tax tip of the week September 16, 2009
Posted by bradstreetblogger in : Tax Tip , 1 comment so farKnowing your tax bracket is important as you make various financial decisions throughout the year.
You can use these tax rates to figure out how much tax you will pay on extra income you earn. For a taxpayer in the 25% tax bracket, extra income will be taxed at that rate until you reach the 28% bracket. Then, all income above that level will be taxed at the 28% rate. Alternatively, you can use these tax rates to figure out how much tax you will save by increasing your deductions. For example, a tax payer in the 25% tax bracket will save 25 cents in federal taxes for every dollar paid in deductible mortgage interest or charitable contributions. Here are the 2009 federal tax rates:
| Single Filing Status |
|
| Taxable Income |
Tax Rate |
| $0 – $8,350 | 10% |
| $8,351 – $33,950 | 15% |
| $33,951 – $82,250 | 25% |
| $82,251 – $171,550 | 28% |
| $171,551 – $372,950 | 33% |
| $372,951 and over | 35% |
| Married Filing Jointly |
|
| Taxable Income |
Tax Rate |
| $0 – $16,700 | 10% |
| $16,701 – $67,900 | 15% |
| $67,901 – $137,050 | 25% |
| $137,051 – $208,850 | 28% |
| $208,851 – $372,950 | 33% |
| $372,951 and over | 35% |
Capital gains are taxed at lower tax rates and are calculated separately. We will talk about capital gain taxes next week.
In addition, you cannot overlook the impact of state, local, school district, social security, Medicare and the many other taxes will have on your final tax bill for the year. We will talk more about these taxes in two weeks and bring it all together. It will not be a pretty picture.
As we begin to approach the end of the year, give us a call to discuss your tax situation. Also give us a call if you file as Head of Household and you want to know your federal tax bracket.
In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit www.bradstreetcpas.com.
…until next week.
New CAT (Commercial Activity Tax) Deadlines – Tax tip of the Week September 9, 2009
Posted by bradstreetblogger in : Tax Tip , 1 comment so farAn important change was recently made by the Ohio Department of Taxation in regards to the due dates of the Commercial Activity Tax (CAT) returns.
If you are a small Ohio business owner with gross receipts in excess of $150,000/year you should have been aware of the need to file an annual CAT return. Previously, the due date of the return was February 10. (Example: if you have gross receipts in your business for 2009 exceeding $150,000 your return would be due February 10, 2010.)
Under the new law, these returns are now due May 10, 2010.
If your business has gross receipts in excess of $1,000,000/year, you will still need to make quarterly filings, but those due dates have also been changed to the following:
| Filing Period | Filing Due Date |
| January 1 – March 31 | May 10th |
| April 1 – June 30 | August 10th |
| July 1 – September 1 | November 10th |
| October 1 – December 31 | February 10th |
The due dates under the old law were very difficult for business owners and tax practitioners to comply with because the due dates fell so close to the end of the accounting periods. The due dates under the new law will make life easier for all of us.
We thank and applaud the Ohio Department of Taxation for finally doing something that makes compliance easier!
As always, call us with any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit www.bradstreetcpas.com.
…until next week.
Job Hunting? Track your Expenses. Tax Tip of the Week September 2, 2009
Posted by bradstreetblogger in : Tax Tip , add a commentLooking for a new job? Expenses related to job seeking are potentially deductible. Here is what you need to know:
- Expenses must be spent on a job search in your current occupation. You may not deduct expenses if changing occupations.
- Outplacement fees are eligible expenses.
- Amounts paid for mailing and preparing résumés are included.
- Travel expenses, including mileage, should be recorded.
- You cannot deduct expenses if you are looking for your first job.
- This is a miscellaneous deduction, so you must be able to itemize your deductions.
Good luck in your job search!
As always, call us with any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit www.bradstreetcpas.com.
…until next week.
