Taxes are on my mind this month as tax season is in full swing. Also you may have heard there is a Presidential election later this year. I probably follow tax policy discussions more closely than the average bear, but I suspect everyone will be hearing a lot about who does or does not pay their fair share of taxes during the campaign. What’s more, several provisions of the 2017 Tax Cut and Jobs Act, including lowered individual tax rates are set to expire on December 31st, 2025. We will also be hearing a lot about whether these cuts should be extended. Which bring me to the topic of today’s newsletter. How much Federal income tax do you *actually* pay? I believe …
Taxes
How Much Income Tax Do You Actually Pay?
Last year, a new client and I were reviewing her expenses. I pointed out that her largest expense (by far) was her Federal/State income tax liability at nearly $20,000 a year. In fact for many people, their largest lifetime expense is income taxes. She looked at me quizzically and exclaimed “But I always get big refunds!” I wanted to weep. Generally when you get a refund, it is because you paid in more than you actually owe. Most taxpayers pay their tax liability throughout the year in the form of tax withholdings. Your employer withholds tax from your paycheck and sends it to the government during your working years. In retirement tax can be withheld from …
How Will You Pay Your Taxes in Retirement?
A client once asked if there is an upper age limit for paying taxes. Answer: No, there is no upper age limit on paying taxes. If you have enough taxable income you must file and pay even if you are a 100 years old. In fact, it’s likely that someone will still be dealing with your tax concerns after you pass away. Death and taxes – two of life’s certainties. After retirement, many people are not sure how taxes will work. Nothing in the tax code is simple, but I hope to shed a little light on post-retirement taxes. Today, I am focusing on Federal taxes. Your state might tax none/some/all of your retirement income. First, let’s take a look …
Have You Ever Really Looked At Your W-2 Form?
Tax season is over and I am grateful my office coffee maker waited until April 20th to stop working. I enjoy coffee year round, but especially during tax season. You may find this strange, but I actually enjoy looking at tax forms so while it’s fresh in my mind I’d like to review one of the most common ones, the W-2.If you are employed, you receive a W-2 each year from your employer. The IRS and, if applicable, your state taxing authority also receive the form. Some taxpayers briefly contemplate their W-2 to prepare their own taxes. For those who outsource their tax prep, it gets thrown onto the pile of forms to give their preparer. Many don’t even take it …
Give to Charity and get a Small Tax Break – even if you don’t itemize!
I’m talking to a lot of clients this month about charitable giving and how to give in the most tax-efficient way possible. Since Tax Reform took effect in 2018 fewer taxpayers are getting a deduction for their charitable contributions. Donations to charity are deducted when a taxpayer itemizes deductions.After Tax Reform far fewer people itemize. Only about 10% of taxpayers now itemize. The other ≈90% take the standard deduction. But in 2020 Congress addedanew tax break for charitable contributions made by taxpayers taking the standard deduction. In 2020 these taxpayers got to deduct $300 in charitable donations. This year, 2021, single tax filers can …