How sweet the numbers look when you live in Texas. If you are considering moving to a new state and the rising prices of everything is effecting your decision. Then you will want to review the following article about the state tax exemptions that are may be available to you if you decide to live in Texas. Be sure to leave you your comments on state exemptions at the end.
Technorati Tags: Taxes, Tax Exemptions, Tax Laws, State Taxes, Texas State Taxes
Ping Pong and Taxes Made Easy
[youtube]http://www.youtube.com/watch?v=2C-jDwHGsOI[/youtube]
What is the Benefit of State Exemptions?
State exemptions are promulgated by the constitution and statutes of each state to allow each resident citizen of that state to keep certain assets for themselves, notwithstanding that citizen may have a money judgment against him or her. Each state has its own set of exemptions. Some states are much more generous than others. It is important to note that exemptions do not apply to businesses; they only are available to human beings.
Texas has probably the best state exemptions over any other state. Some say Florida and Nevada have the best. It all depends on what kind of assets you own and whether Texas, Florida, Nevada or your state of residence exempts them and how much in value can be exempted. State exemptions are only applicable to you for the state in which you maintain your principal residence or legally have your domicile.
Texas exempts two types of real property: (a) one or more cemetery plots: and (b) a homestead. Either families or single adults may claim homesteads. The homestead may be either rural or urban. An urban homestead may be used as a home and business. The size of an urban homestead is the same for families or single adults: it may consist of up to ten acres on one or more contiguous lots, including any and all improvements on the land. A rural homestead for a family is limited to 200 acres and includes any improvements on the land. A rural homestead for a single person is limited to 100 acres and any improvements on the land. So, you can build the Taj Mahal on your urban homestead of 10 acres or less and feel secure in living out your days in peace, so long as you pay your mortgage, taxes (income and property) and those you hire to improve or add on to your property. The same goes for a rural homestead. If you sell your homestead, the proceeds are exempt for six
months. In other words, if you do have a creditor with a judgment against you, you have six months to reinvest in another homestead or other exempt property or spend it, or any combination thereof.
Now, lets discuss personal property exemptions in Texas. We have two different types of exemptions for personal property: (1) an “aggregate” exemption for certain kinds of personal property, limited by the combined value of the property; and (2) unlimited exemptions for other kinds of personal property. Families and single adults may exempt certain kinds of personal property from the claims of creditors as long as the combined fair market value of the property does not exceed: (1) $60,000 for a family; or (2) $30,000 for a single adult. The kinds of personal property that may be included in the aggregate exemption are: (a) home furnishings and family heirlooms; (b) food and staples; (c) farming or ranching vehicles and implements; (d) tools, equipment, books and apparatus, including boats and motor vehicles, used in a trade or profession; (e) clothes; (f) jewelry, as long as it does not exceed 25% of the value of the aggregate $60,000 or $30,000 exemption; (g) two
firearms; (h) athletic and sporting equipment, including bicycles; (i) a motor vehicle for each member of a family or single adult who holds a driver’s license or does not hold a drivers license but relies on another person to operate the vehicle for the unlicensed person; (j) the following animals, including food on hand for their consumption: (A) two horses, mules, or donkeys, including a saddle , blanket and bridle for each one; (B) 12 head of cattle; (C) 60 head of other types of livestock; and (D) 120 fowl; and last, but not least, (k) household pets. There is one more addition to this list and it is unpaid commissions for personal services as long as the amount does not exceed 25% of the $30,000 or $60,000 aggregate.
In addition to the kinds of personal property that may be exempted under the aggregate exemption just described, a debtor may also exempt, without regard to value, the following kind of property: (a) current wages for personal services; (b) professionally prescribed health aids of the debtor or a dependent of the debtor; and (c) alimony, support, or separate maintenance received or to be received by the debtor for the debtor’s support or a dependent of the debtor. “Current wages” are wages owed to an employee. Once the wages have been paid to the employee, they are not “current wages” for and they are no longer exempt. This means that if you are an employee, your employer cannot be required to hand over your paycheck to your creditor, but if you deposit it in an account or cash it in, it is no longer exempt. Also, if you are a deadbeat dad or mom, your current wages will be subject to the enforcement of court-ordered child support payments.
But wait, there is more. A debtor is entitled to an unlimited exemption for his rights in retirement plans. The exemption includes the debtor’s right to payments under, or the right to assets held in, the following types of plans: (a) stock bonus, pension, profit-sharing plans, and similar plans, including retirement plans for self-employed individuals; (b) annuities purchased with assets distributed from such plans; (c) retirement annuities or accounts described in section 403(B) or 408A of the Internal Revenue Code; (d) individual retirement accounts or annuities, including a simplified employee pension plan; and (e) government or church plans or contracts that qualify under the Employee Retirement Income Security Act of 1974.
Finally, an insured or beneficiary of a life insurance policy or annuity has an unlimited exemption of the policy value or benefits to be paid from seizure of a judgment creditor, except for a child support lien.
I don’t know about you, but Texas looks like a pretty good place to hang your hat.
About the Author:
James C. Mulder is an attorney with over thirty years of experience in Wealth Transfer, Tax and Asset Protection Planning. He is Board Certified in Estate Planning and Probate Law and in Tax Law by the Texas Board of Legal Specialization. He is one of only nine attorneys in the Houston area that are Board certified in both Estate Planning and Probate Law and Tax Law. Mr. Mulder concentrates his practice in Wealth transfer, tax, and asset protection planning. The implementation of such planning includes the preparation of very comprehensive wills, trusts, business organizations and family partnerships. Mr. Mulder has prepared over 1,000 asset protection plans. Mr. Mulder is a frequent contributor to Steven Kay’s business talk radio show on CNN AM 650 Houston.
Once you have read the following fifteen IRS facts, please share your
thoughts with a comment at the end.
15 Interesting Facts About the Irs
1. When it was first created, the IRS was known as the Bureau of Internal
Revenue. In the 1950’s the name was changed to the Internal Revenue
Service.
2. The initial income tax was only 3% tax on individuals making over
$800. Today the top tax bracket consists of a 35% tax.
3. The IRS was created
by President Abraham Lincoln during the Civil War to help pay for the military
expenses.
4. In order for the IRS to print the necessary forms and documents
over 300,000 trees are cut down every year.
5. The IRS collected $2.2
trillion in 2006, with $1.2 trillion coming from just federal income
taxes.
6. Prior to the introduction of the Taxpayer Bill of Rights in 1998,
the burden of proof was put entirely on taxpayers, meaning taxpayers had to
prove themselves innocent.
7. The IRS sends out an average 8 billion page of
paper every tax season. If all the pieces of paper were laid out end-to-end, it
would wrap around the earth 28 times.
8. Over 229 million income tax returns
were filed with the IRS in 2006.
9. The federal government spends $200
billion per year on federal tax compliance, which is more money than it takes to
produce all of the cars in the United States.
10. The IRS employs over
114,000 people. That’s over double as many as the CIA and five times more than
the FBI.
11. The United States tax systems is widely known for being
confusing and difficult to understand. Therefore, over 60% of taxpayers seek
professional help preparing their tax returns.
12. The average family pays
over 38% of their total income to the IRS, which is more than the average family
spends on food, clothing, and shelter combined.
13. The IRS has a whistle
blowers program designed to help catch tax evaders. In 2005 they paid over $27
million to informants that resulted in nearly $350 million in revenue.
14.
The federal government spends about $10 billion per year to pay the IRS’s
114,000 employees.
15. Tax Day, the date when tax returns must be filed with
the IRS usually lands on April 15th. However, if the 15th is a weekend or
holiday, Tax Day is moved to the next business day.
About the Author:
The Tax Lady Roni Deutch and her law firm Roni Lynn Deutch, A
Professional Tax Corporation have been helping taxpayers across the nation
settle their IRS wage garnishments for over seventeen years.
Technorati Tags: Money, Taxes, Facts, Tax, Government, Irs, Tax Help, Interesting
Five Reasons Why You May Want to Hire a Tax Professional
As you
progress through your life, your finances get more complicated and preparing
taxes becomes more time consuming and stressful. In fact, according to the IRS,
it took an average of 37.8 hours to prepare the regular Form 1040 in 2006, even
when using even when using tax software. No wonder tax season is declared by
various pollsters as the second most stressful time of the year just behind the
Christmas season.
If you are one of many Americans who prepare their own
taxes, the following list should help you consider whether to hire a tax
professional (e.g. CPA or EA) or continue to self prepare using online tax
software. You should consider hiring a tax professional if any one of the
following applies to you:
You have a relatively complicated
return. By “complicated” we mean a tax return that involves a moderate
level of itemized deductions, capital gains/losses from investments, self-employment income, home sales,
rental, AMT, etc. In addition to saving yourself from the stress and countless
hours spent in preparation, an experience tax professional should help you
prepare accurate and audit-proof tax returns.
Your life changed in
the past year. If you started your own business, bought a home, got
married or divorced, started investing, changed jobs, or had other life changing events, you should
work with a tax professional to make sure that income is properly reported and
no deduction is overlooked.
You get headache thinking about
tax. It’s only natural given the complexity of the U.S. tax code and
the fact that you do not spend most of your waking hours studying tax laws.
Also, an average taxpayer does not have the time or the motivation to keep up
with the constantly changing U.S. tax laws.
You don’t have
time. If you simply can’t afford to spend days on preparing taxes or
can’t take on additional stress, you should have a tax professional prepare your
taxes. Fees paid to a tax professional may be well worth the price if it means
that you can go about your life uninterrupted by the stress of tax
preparation.
You need professional advice on how to
structure your activities to minimize your tax exposure in the future. If you
are concerned about your high tax bills year after year, you should consult with
a tax professional regarding ways to structure your finances to maximize tax
credits and deductions. Some examples include shifting income among household
members, deducting various business related expenses, and deferring income to
future years.
About the Author:
Martin Lee, CPA, is with taxCPAdirect, an online CPA firm. For more
information, email mlee@taxcpadirect.com or visit www.taxcpadirect.com.
Technorati Tags: Taxes, Tax, Tax Preparation, Tax Professional
If you want to get the best tax refund then you need to make sure you include all available deductions on your income tax return. Deductions are the key to reducing your taxable income and getting a tax refund. However, millions of taxpayers are not up to date with current deductions and often miss valuable opportunities to save money. Below are 7 commonly overlooked deductions that you may want to include on your own tax return.
1. Medical Expenses
If your medical expenses for a single year total 7.5% or more of your adjusted gross income then you can deduct the expenses from your taxable income. Although the total percentage required may seem high, if you plan elective surgeries or other pricey medical expenses you can easily meet the requirement.
2. State Sales Tax
The IRS allows you to deduct the total cost of state income taxes or your total sales tax paid the previous year. If you live in an area without state or local income taxes then you should deduct your total sales taxes paid.
3. College Tuition
The IRS will allow you to deduct up to $4,000.00 paid in college tuition on yourself, your spouse, or any dependents. This break can be especially beneficial to taxpayers whose income is too high to qualify for the Hope or Lifetime Learning credit.
4. Smaller Charitable Contributions
People hardly ever forget to claim the big charitable contributions they make, but the little things also add up. For example, if you volunteer at a bake sale remember to deduct the cost for ingredients you used to prepare the baked goods.
5. State Taxes Paid the Previous Year
If you paid additional taxes to the state in the previous year then you can also deduct those expenses from your current income tax return. You can also deduct state income taxes withheld from your paychecks or quarterly payments.
6. Jury Payments Forfeited to an Employer
Many employers who continue to pay an employee’s full salary while they are serving jury duty request that the employee forfeit their jury payments. If your employer has this rule and you served on jury duty this year then you can deduct the total amount from your taxable income.
7. Cost of Income Tax Preparation
You can deduct any expenses you incurred to have your tax returns prepared. This includes tax software and actual tax preparation services. However you need to include these costs in the tax year you paid them. Thus, you would claim your 2005 cost of tax preparation expenses when completing your 2006 tax return.
Technorati Tags: Taxes, Tax, Tax Help, Tax Preparation, INCOME TAX RETURNS
About the Author:
Roni Deutch opened the Roni Deutch Tax Center to fill the need in this country for competent income tax return preparation. For more help with your taxes check out her Tax Help Blog.
