Understanding Tax Brackets

There is a lot of talk lately about tax brackets and who falls into which bracket. All of this talk can be confusing and overwhelming, especially if you don’t really understand what tax brackets are all about.

The first thing to understand is that tax brackets exist because America has what is referred to as a progressive tax system. That means that people who earn more are typically taxed more. The IRS determines how much people are taxed by placing them into different tax brackets based on their incomes.

Right now, there are seven tax brackets in existence. Those who fall into the lowest tax bracket are taxed at a 10% rate while those who fall in the highest tax bracket are taxed at a 39.6% rate. These figures do change each year; they typically get higher since they are adjusted for inflation.

A lot of people feel that it is unfair to be taxed more simply because they earn more. Even those who don’t mind the system, however, often find ways to try and pay less in taxes, such as through exemptions, deductions, and adjustments. How valuable different tax-lowering measures such as these will be to you all depends on the tax bracket that you fall into, so knowing that information is the first step toward making a “plan of attack” for how to pay less in taxes.

Of course, if you still find all of this complicated, you can also choose to visit with your accountant for more information. This person can first let you know what tax bracket you’re in, the various ways in which your bracket affects you based on the specifics of your situation, and what you can do to lower your taxes as much as possible. Even if you do understand brackets, a little help lowering your taxes definitely can’t hurt!

Tax Breaks for Military Members

If you serve in the military, then you’ll be glad to know that the IRS rewards your service with many excellent tax breaks, which can help you to save a lot of money! Here are just a few of many tax breaks that may make a positive difference in your life. 

The Residency-Based Tax Break

To start off with, one nice thing is that, if you declare residency in one state, and then, due to your military service, get transferred to another, you can keep your residency if you prefer. This can really come in handy if you had residency in a tax-free state and get transferred to a non tax-free state. This really nice benefit extends not just to service members, but to their spouses as well, so it’s definitely worth taking advantage of!

The Moving Expenses Tax Break

One unfortunate part of being in the military is that you often have to pick up and move at a moment’s notice. If that does happen to you, though, you can deduct your moving expenses from your taxes. That includes any and all costs incurred as a result of the move, such as the cost of a moving truck or even what you paid for boxes to pack your stuff in!

Uniform Costs Deductions

In the military, you have to wear a uniform for most jobs. Well, if those uniforms aren’t going to be worn anywhere else, you can deduct their cost from your taxes! You can also deduct any costs related to cleaning them, replacing them, repairing them, and other relevant costs, so keep track of any and all spending related to your work uniforms.

These are really just a few of many deductions you can enjoy as a military member, so take full advantage of them and be sure to ask your accountant about other deductions that may apply.

Simple Tips for the Temporarily Self Employed

Some people choose to be self-employed for the long haul, often because they love the freedom a self-employed life provides. For others, though, self-employment is just something that they do temporarily, often in order to make ends meet during a rough patch or when they’re in between jobs. These people have a whole different set of rules and information they need to know than the permanently self-employed. If “temporarily self-employed” best describes your situation or soon-to-be situation, there are a few things you should know.   

Tip #1: Have a Backup Plan

One important thing to realize as you start your journey of being self-employed is that, unlike with a steady job with a regular paycheck, being self-employed can have its ups and downs. You may have times where you’re making lots of money, followed by times where you’re struggling. Thus, it’s important never to get too reliant on any one client or type of work. Be diverse and find lots of jobs you can do to keep the money rolling in, no matter what.

Tip #2: Build Your Savings

As mentioned, there can be lots of fluctuations and “dry spots” when you’re self-employed, especially in the initial stages. Thus, consistently work toward having a sizeable savings account you can fall back on just in case. Ideally, you’d already have your savings account well-established before you strike out on your own.

Tip #3: Pay Taxes Quarterly

Finally, since self-employment taxes can be quite high, it’s often best to pay your taxes quarterly, instead of yearly, so you’re not hit with a huge amount owed all at once.  It’s also smart to consider working with an accountant during your self-employment period since figuring out these taxes and the special laws that apply to self-employment can be a challenge.

If you can follow these simple tips and seek out the help you need, you should have no problem enjoying your self-employment phase….who knows, you might even decide to make it permanent!

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What You Need to Know About Bonuses

When you get a bonus at work, it’s normal to feel happy and excited. You should know, however, that bonuses, like all income, are taxable. They are considered, by the IRS, as “supplemental wages,” and thus, may be taken from your taxes via the percentage method or the aggregate method, depending on the specifics.   

The Percentage Method

It is typically up to your employers to determine which method will be used to tax your bonus. More often than not, however, employers choose the percentage method, through which 25% of your bonus is given to the IRS.

This method is favored by employees because it’s the easiest and simplest way to apply taxes to supplemental income. Plus, this method tends to take less of your bonus than the aggregate method, so it’s actually a good thing for you that most employers prefer the percentage method.

The Aggregate Method

While the aggregate method isn’t used as often as the percentage method, it still exists and is used fairly regularly. It’s mostly used when your employer chooses to pay your bonus into your regular paycheck. When this happens, the employer will determine the normal withholding amount based on your paycheck plus the bonus, subtract any withholdings taken from your last check, and then withhold the remainder from your bonus amount.

Not only is this method complex and even confusing for everyone involved, but it also means you often get taxed more than you would have if just a flat 25% had been taken from your bonus.

Unfortunately, though, you can’t control which method of taxation your employer chooses. As a result, you’ll just have to enjoy the fact that at least you got a bonus! Plus, now, at least, you’ll be able to clearly understand where some of your money went so you don’t end up confused.

Going to School Later in Life

Many people dream of getting an education later in their life. Whether it’s because other obstacles prevented them from ever going to school in the first place or because they didn’t complete their schooling the first time around, the fact of the matter is that going back to school is a wonderful thing, one that can be made even more wonderful, at least from a financial standpoint, by taking advantage of all of the financial tax credits and deductions that are available.   

The American Opportunity Tax Credit

If you’ve never been to school in your life or if you never completed school, then you can qualify for the American Opportunity Tax Credit, a wonderful credit that gives you money for your first four years of schooling. Depending upon your circumstances, you can actually receive as much as $2,500! That’s a pretty nice way to make it through school.

Of course, if you’ve already done your four years, this credit doesn’t apply, but if you haven’t and your income is within the (very reasonable) tax bracket, it’s typically yours for the taking. If you think you qualify for this awesome credit, talk to your financial adviser to learn how to get it!

The Loan Interest Deduction

Many people who make the smart decision to go back to school end up taking out student loans. And, while that may not seem like such a great thing to do, it can be if you are wise enough to deduct the interest on them, which can save you a big bundle of money in the long run.

In fact, depending on your circumstances, you could potentially deduct as much as $2,500 on interest paid, so if it starts seeming like student loans are your best bet, talk to your tax adviser about this option.

Obviously, going back to school is a great thing, one the government makes every effort to help you out with! To learn more about other ways to save and benefit from heading back to school, find an accountant, and talk about these and many other excellent options that exist.

How Does Tying the Knot Affect Your Taxes?

If you’re about to get married, then your thoughts are probably consumed with wedding bells and honeymoon plans, but, while it might not be romantic, pre-wedding time is also a time during which you need to be thinking about your finances, and,more specifically, your taxes. Getting married

comes with a number of financial implications; thus, before you tie the knot, there are some things that you should be aware of and that you should talk over with your partner and soon to be spouse.

How Will You File?

One of the first financial decisions that you will have to make as a married couple is whether you want to file separately or jointly. Each option can be good, but each option can also not be the best choice. It really all depends on your situation and how your chosen filing status, based primarily on the amount of your combined incomes, will affect your taxes.

Most of the time, it is more beneficial to file jointly, but this is certainly not always the case, For that reason, it is always wise when you get married, or, for that matter, go through any major life change, to seek the help and expert advice of a qualified financial professional.

Should You Take Advantage of the Unlimited Marital Deduction?

Another thing you will want to think about, as a couple, is whether or not you should take advantage of the unlimited marital tax deduction. This isn’t the most “cheery” topic to think about since it deals with what would happen to assets in the event of the death of a spouse.

However, those who do have this benefit are able to have assets transferred to the surviving spouse, so, while the topic may not be nice to think about, the benefit is definitely worth educating yourself on just in case. A financial adviser can provide you with more information about this benefit and how you might go about receiving it.

These are really just two of many things you should consider as a soon-to-be-married person. Remember, as you go through this joyous life change, don’t forget to think about finances and to seek the help and advice of a financial professional!

“House Hopping” and How to Do it the Right Way

There is nothing more exciting than buying a new home. Of course, if you already own a home, typically you’ll want to sell that one first before you make any offers. Don’t worry too much, though, it’s a “seller’s market” right now because property inventory is quite low. Plus, if you can follow some basic financial tips, you can typically sell your old home and get a nicer, newer one with no stress or hassle!     

Tip #1: Make A Contingency Offer

First of all, consider making a contingency offer when you are looking at potential new homes. That simply means that any offer that you make will be contingent on someone buying your home.That way, you won’t get roped into something you can’t afford on the off chance that your home doesn’t sell as quickly as you might hope.

Most sellers will gladly accept a contingency offer as long as you can demonstrate that there is a very good chance that your home will sell quickly.

Tip #2: Consider a Bridge Loan

Another thing you may want to think about is trying a bridge loan. This can be especially useful if you’re eager to get into a new home quickly but are still working on selling your old one. These loans are simply short-term loans that use your old home as collateral. This will give you money that you can use to purchase your new home, and then, when your old home sells, you can quickly and easily pay off the bridge loan.

Of course, this option will only work if you have enough equity built up in your old home and if you are otherwise able to qualify for a loan. If you can meet those qualifications, though, and if you can swing two mortgage payments for a short time, you should be all set!

Tip #3: Don’t Forget Deductions

Finally, no matter what route you choose to get out of your old home and into a new one, don’t forget about the many deductions that exist for people in your situation.You can get a deduction for interest paid on your mortgage, interest on loans for the purchase of your new home, on property taxes, and more. If you’re making this literal move, talk to a financial adviser to learn about any and all deductions you can qualify for to help enable your dream to come true while still sticking to a budget.

As you can see, it’s very possible…and even easier than you might have thought…to get out of your home and into a new one, especially if you can follow these simple tips.

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Tax Tips for Gig Workers

Are you someone who makes money “on the side” or “under the table?” In other words, do you earn or supplement your income with simple gigs? These days, with so many money-making sites and services, such as Uber and Elance, it’s quite easy to make money doing small gigs. However, you need to understand that, if you make above a certain amount, you may qualify as an independent contractor and thus need to file special tax forms and meet other obligations.

Record Everything!

To start off with, if you do earn money through gigs, then you need to make sure that you are keeping clear and detailed records of who you earn money from and how much. That way, you can determine, preferably with the help of a knowledgeable accountant, what your tax obligations are and how to best meet them.

It can often be helpful, in addition to keeping detailed records, to maintain a separate bank account just for your “gig money,” as well as any relevant spending you do. This can help you to maintain a detailed and easy to access record of gig-related spending and earning.

Deduct Where You Can

While paying taxes on your gig money may not be fun, there are some upsides to being a “gig worker.” If you do your gigs from home, for example, and you have a home office that you use exclusively for gig work, you can get a nice tax deduction. Other deductions exist for the self-employed as well, so be sure to discuss your deduction options with your accountant or financial adviser.

Working gigs, whether you do it full-time or part-time, is a great way to make money, but it can turn into a big hassle if you don’t know how to properly manage your finances and taxes, so remember to seek professional help as needed so that you can benefit as much as possible from your gig working.

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Energy Tax Credit Info

In case you haven’t heard, there is an energy tax credit available to those who add renewable energy sources to their homes. Yes, these features can take some money upfront, when you first buy them, but after that, they’ll typically save you money in the form of reduced heating and cooling bills. Plus, if you take advantage of the energy tax credit, you’ll see some money savings there too.  

Before you start banking on cashing in on this credit, however, be aware that only certain home improvements qualify for the credit. So, if you want to ensure you get the credit, speak with your accountant and/or tax adviser before buying anything or making any home improvements. That way, you’ll be sure to make improvements that qualify for the credit. You can also increase your chances of successfully securing the energy tax credit by following these simple tips.

Tip #1: Get Proof

First things first, don’t shell out money for anything- be it a product or a service- without knowing that you can get documentable proof of it. You need proof of your payment, like a receipt, as well as proof of the fact that the product/service qualifies you for the credit. As long as you have these things, you shouldn’t have a hard time getting your credit OR getting it in the maximum amount possible.

Tip #2: Look to State Credits

While getting the federal credit is definitely nice, did you know that, in some states, there are also state level credits available for certain “green” home improvements?

Research laws in your state and talk to your accountant to see what options you have for qualifying for state-level credits as well. In some cases, you may even be able to get both state and federal credits, which would truly double your money!

Remember, educating yourself and having a good accountant and/or tax advisor on your side are definitely key to qualifying for this great credit and saving yourself some money both now and in the long-run.

The NFL and Taxes

Do you dream of one day earning big sums of money? Perhaps you are even envious of the salaries of people like famous actors or professional football players. Did you ever stop to think, however, about the amount of taxes these types of people, football players especially, have to pay?   

NFL players are some of the most taxed people in America. In fact, they often have to pay top taxes- often as much as 50% at both the federal and local levels. It gets worse too. A lot of these players have to pay taxes not just to the state where their home/home team is based but also to any states in which they’ve played a game throughout the year. This means filing lots of different and complicated tax returns and basically makes for a pretty darn miserable tax season.

Some NFL players have it worse than others too. For example, those who play for one of California’s teams have to pay the highest state-level tax thanks to the state’s harsh tax code. Regardless of where a team is based, though, its members are going to have to pay a lot in taxes, which is one of the few downsides to being an NFL star.

Really, though, it all evens out in the end. Of course, if you’re making millions, you’re going to have a higher tax bill. That’s just the way it goes. And, really, at the end of the day, wouldn’t you gladly pay high taxes for a millionaire paycheck and NFL fame? Yeah, we thought so!

When Taxes Might Not Apply

Sometimes, it can feel like you have to pay taxes on absolutely EVERYTHING. Fortunately, though, even though it may seem that way, there are actually some things you may not have to pay taxes on. So, if you’re feeling blue about all the taxes you have to pay, consider these great, non-taxable things.

Tax-Freebie #1: Money You Make from Selling Your Home

To begin with, in most cases, you won’t be taxed on any profits you garner from the sale of your home. Sounds pretty great, right? As long as you’ve used the home as your main personal residence for at least two years  and have owned it for at least a total of five years, you won’t be taxed on any profits you earn from selling your home…providing you don’t earn more than $250,000 or more than $500,000 if you’re married. Of course, some exceptions do apply, so before you forego paying taxes on the sale of your home, check with an accountant to make sure you qualify for this tax break!

Tax-Freebie #2: Gifts from Your Employer

Another nice way to get something without paying taxes is if you’re given a non-monetary gift or benefit from your employer. Nine times out of ten, you won’t be required to pay taxes on the gift. So, whether it’s a fruit basket, free insurance, a gym membership, free tickets to a show, or anything in between, you can just enjoy it tax-free. Of course, when in doubt, always check with your accountant, but you should be in the clear with this one!

Tax-Freebie #3: A Medical Settlement     

If you get hurt on the job or end up with a doctor who does something wrong, and it results in a medical settlement or a nice payment from worker’s comp, you won’t have to pay any taxes on the money. There are some exceptions, though. You, for example, MAY have to pay taxes if the settlement includes interest or income for punitive damages/lost wages.  Your lawyer and/or your accountant can let you know for sure what, if any, taxes are owed in these circumstances.

As you can see, sometimes you can enjoy something without paying taxes on it! And, since these freebies don’t come around that often, definitely take advantage of them when you can!

Tax Untruths You Need to Know

When it comes to taxes and tax law, people say and believe all kinds of things that just plain aren’t true.  Some of the things they believe are wrong but ultimately harmless. Believing some untruths, though, can end up hurting you big time, especially if you let these myths affect how or when you file your taxes.  So, to avoid falling victim to tax lies, listen up while we divulge some of the biggest tax myths that people commonly believe in.    

Tax Lie #1: You Can Deduct the Cost of Your Work Clothes

You may have heard the myth that, whatever clothes you buy for work, you can deduct from your tax bill. While it would certainly be nice if this was true- hey, we could all deduct expensive designer clothing and claim it was for work- it just isn’t.

The only time you can deduct the cost of work clothing is if you are required to purchase a specific type of clothing that MUST be worn for work and that can ONLY be worn for work. So, deducting the cost of that couture dress as a work expense just isn’t going to happen.

Tax Lie #2: If You File an Extension, You can Worry About Paying Taxes Later

If you’ve ever owed taxes and felt unsure about how you were going to pay them, someone may have suggested that you file an extension so that you’d have more time to pay. Unfortunately, though, this strategy doesn’t work!

Getting an extension gives you more time to pay your taxes, yes, but any money you owe will still be due at the regular time, and, if you don’t pay it, you’ll keep accruing charges and fees, which is the last thing you want when you’re already in a financial bind.

Tax Lie #3: Getting Bumped into the Next Tax Bracket is the Worst Thing Ever

Finally, if you live in fear of making more money and getting bumped into a higher tax bracket, stop it right now! A lot of people turn something that should be wonderful- getting a raise- into something to be feared and dreaded.

While it is true that you will probably have to pay more in taxes if you get bumped into a higher bracket, it’s also true that, more than likely, you’re not going to have to pay some crazy amount. In fact, you’ll really only be taxed an increased amount for any income you make that exceeds the tax bracket threshold. In other words, you won’t have to pay higher taxes on your WHOLE income, so relax and don’t be afraid to earn more money!

As you can see, people believe lots of things about taxes that just aren’t true. Educate yourself on the truth about tax law, and, when in doubt, don’t be afraid to ask an accountant!

How Do Your State Property Taxes Stack Up?

Did you know that property tax amounts vary greatly from state to state? That’s right! While you may be paying one amount in property taxes, friends in another state may be paying much less (or much more)!

Right now, the state with the highest property taxes of all is New Jersey, while Hawaii has the honor of having the lowest property taxes.

No matter where people live and what their property tax rates, however, the fact remains that a great many people, all across the nation, aren’t able to pay their property taxes or to pay them in full. In fact, the National Tax Lien Association reports that around $11.8 billion in property taxes go unpaid each year.

Your chances of being in the “unpaid group” are greatly reduced if you live in one of the following states with the lowest property taxes:

·         Alabama

·         Hawaii

·         Louisiana                                                                               

·         Delaware

·         D.C.

·         South Carolina

·         West Virginia

·         Arkansas

·         Colorado

·         Wyoming

If you’re not fortunate enough to live in one of those states, hopefully you’re not in any of the following states that have super high property taxes:

·         New Jersey

·         New Hampshire

·         Illinois  :(

·         Texas

·         Wisconsin

·         Nebraska

·         Connecticut

·         Vermont

·         Michigan

·         Rhode Island

No matter where you live, you should talk to your accountant about ways to potentially reduce your taxes in general so that, hopefully, none of your required tax payments will end up hitting you too hard!

How Does Your State Beer Tax Rank?

Did you know that every state pays some kind of beer tax? The exact amount of this tax varies from state to state, but everyone does have to pay some kind of tax on the beloved beverage. As of right now, the state of Tennessee has it the worst with a beer tax holding steady at $1.29 per gallon of beer.

On the opposite end of the spectrum, Wyoming residents get the best deal with a beer tax of only two cents per gallon!   

You may be wondering how beer taxes can vary so much from one state to the next, but it really all depends on which particular formula a state chooses to use to come up with its beer tax. Some states, for example, base their taxes by volume, others just add in even more sales tax. It’s really a matter of preference from state to state, which means that some states have a huge beer tax, and others have one that’s barely there.

With that said, you’ll pay the most for beer if you live in any of the following states:

·         Tennessee

·         Hawaii

·         Alaska

·         Georgia

·         Alabama

And, the lucky folks residing in these states will pay the least for their beer:

·         Wyoming

·         Indiana

·         Missouri

·         New Jersey

·         Wisconsin

·         Rhode Island

·         Colorado

·         Massachusetts

·         Oregon

·         Pennsylvania

Regardless of where your state falls in terms of its beer tax amount, one truth remains: people who love beer typically love it enough that they’ll pay the tax, no matter what it is!

Simple Strategies for Lowering Your Taxes

Taxes are a necessary and inescapable part of life. Just because you HAVE to pay them, however, doesn’t necessarily mean that you have to pay through the nose. In fact,  it’s always smart to try and find ways to save money on your taxes, and fortunately, finding these money-saving options really isn’t all that hard, at least not if you know and follow some simple tips and strategies.

Take Advantage of the Earned Income Tax Credit

One option you have, depending on how much income you bring home, is to take advantage of the earned income tax credit (EITC), if you’re eligible. This tax allows those who qualify, typically lower-income individuals, to pay less in taxes and to enjoy a nice little tax credit that can sometimes be worth thousands of dollars.  Research this credit to see if you qualify, and, if so, take advantage of it right away!

Consider Buying a Home

If you’ve been thinking about taking the plunge and buying a house, go ahead and go for it! You’ll likely end up paying less in taxes than you would by renting. The reason for that is that you can  

deduct both mortgage interest and property taxes, which can lead to some big savings come tax time.

Make Some Contributions

Finally, consider making contributions to either a health savings account (HSA) or a flexible savings account (FSA). Any contributions you make won’t be taxed, which means lower tax bills and a nice, constantly growing savings that you can use as needed.

As you can see, there are many ways to pay less on your taxes each year. Research these and other options to see what your best choices are, and also talk with your accountant about the best ways to lower your tax bill. With a little effort, you can cut your tax costs in half (or more!), so it’s definitely worth the time and effort.

Will Wedding Bells Mean Higher Tax Bills?

Getting married is a joyous occasion, one that we celebrate and look forward to for a large chunk of  our lives. On the flipside, though, marriage can also, unfortunately, bring higher taxes. Whatever the reasons, tax law tends to favor single filers, so, after your nuptials, don’t be surprised if you notice an increase in your tax bill. The good news is that, with a skilled accountant on your side, you can avoid some common tax penalties that affect the newly married, but the fact of the matter is, you likely will fall victim to at least some of the following tax penalties that can affect married couples.

Tax Bracket Penalties   

You probably already know that, the higher the tax bracket you fall into, the more money you will have to pay in taxes. What you might not realize, however, is that, even though, when filing jointly, you’re now filing two incomes instead of one, you don’t get to double your income without penalty.

Sadly, while the highest tax bracket threshold for single filers is $413,201, the threshold for married couples is only slightly more: $464,851. If you don’t fall within this high tax bracket, you don’t have TOO much to worry about, but, if you do, then you might find yourself paying a lot more in taxes than before you were married unless you work around the rules, in a legal way, with your accountant.

Child Tax Credit Penalties

Having children can often mean that you get cut a nice tax break when filing time rolls around, but, unfortunately, married couples can sometimes have a hard time getting this credit. While singles can get it in full as long as they’re not making more than $75,000 per year, married couples don’t get to double that limit. They can only make less than $110,000 and still qualify for the full credit.

IRA Deductions

Finally, if you’re rocking a traditional IRA during your single years, you’ll be glad to find that you can deduct your full contributions up to $61,000. And, as is the case with the other items discussed here, you won’t get to double that when you get married. Instead, your limit will only increase by about 60%- $98,000.

While it may not seem fair that tax law tends to favor the singles, this is NOT a good enough reason not to get married. Instead, it just means that, before you say, “I Do,” you need to speak with your accountant and see what you can do to wreak the least havoc on your taxes after the big day.

Mortgage Interest Deductions

If you own a home or are thinking about buying one in the near future, you should know about mortgage interest deductions, which basically allow you to subtract any income you spend paying interest on your mortgage loan from your taxable income, which will end up reducing how much you have to pay in taxes.   

In the early stages of owning your home, this nice little “bonus” of lowered taxes can really help. Don’t get too used to it, though, because as your interest is reduced over time, your deduction will also get reduced. However, saving something is always better than saving nothing, right?

Of course, some exceptions do apply. To start with, you’ll only enjoy this break on up to two homes and only on the first $1 million of any mortgage. That’s because this benefit was designed to help lower to middle class citizens and to make home ownership more attainable and more beneficial to them. On a nice note, other, similar deductions and credits are available to help make home ownership a little bit easier on the average wallet!

One great deduction is the real estate tax deduction, which lets you deduct property taxes on your home from your taxable income. Again, this benefit is good for up to two homes. To learn more about other potential benefits of home ownership and how to take advantage of and make the most of them, be sure to talk with your tax adviser.

It’s especially smart to speak with a tax professional even before you buy a home so that you can go ahead and plan your budget with all possible savings factored in, but, even if you’ve already made your home purchase, it’s never too late to take advantage of the options available to you!

The Truth About the October Tax Extension

Were you unable, for whatever reason, to get your taxes filed by the April deadline? If so, you may have thought it was “no big deal” since extensions are fairly easily granted and give you until October 17^th to file. Unfortunately, though, a lot of people who get extensions waste that extra six months and don’t prepare like they should. Don’t be that person! Also, make sure to educate yourself about this “convenient” tax deadline so that you can determine if it’s really the best move to make in the future.

You Still Have to Pay Owed Taxes

First things first, if you owed taxes, don’t think that just because you got an extension on your tax return, you also got an extension on the money owed. You still owe that money, and, if you don’t pay it on time, you’ll usually get hit with penalties and interest. Talk to your accountant about what you can do to avoid fees and penalties or at least to reduce what you owe.   

You Can Extend Again

If you do end up needing more time to file come October, you MAY be able to get another extension, but don’t bank on it. Typically, second extensions are only offered for extenuating circumstances, such as living outside of the United States or being deployed. If you think you may need another extension, ask your tax adviser what you can do and if you qualify.

The bottom line in all of this is that, whenever possible, you should try and file your taxes on time. Request an extension only if you really need it and, then, for best results, work with an accountant to help you go through the process smoothly.

Property Tax Exemptions Worth Knowing About

It’s no secret that property taxes can get pretty high, and, while you can’t escape paying them altogether, there definitely are things that you can do to cut down on your property taxes. In fact, there are quite a few credits, deductions, and exemptions that you may qualify for. We’ll cover a few of the basics here, but remember, you should always be able to go to your accountant and/or tax adviser to learn more about available discounts and how to take advantage of them.  

Veteran Assistance

First things first, are you a veteran? If so, then there are probably several different property tax related credits, deductions, and/or exemptions that you can qualify for. However, these do vary from state to state, so, where you live will play a big role in which of these you can receive. Ask your tax adviser to point you in the right direction!

Aid for Senior Citizens

Veterans aren’t the only ones who can get a break on their taxes! Senior citizens are another group that is often eligible for discounts, especially in the case of senior citizens who are over 65 and fall into a lower income bracket. Again, these discounts do vary from one state to the next, so check with your tax adviser. It’s definitely worth the effort because some discounts are so good they can keep you out of foreclosure.

A Hand for Farmers

Finally, even farmers can get a little credit...literally. Land that is deemed “agriculturally productive” qualifies for property tax breaks in most states, especially Florida, which is very liberal when it comes to handing out this credit. Other states, however, have more stringent requirements, but, no matter where you live, this credit and all the others are worth looking into. In fact, you should really ask your tax adviser to help you uncover and make the most of every possible discount you may be eligible for!

Understanding Tax Shelters

Most people are unclear on what exactly “tax shelters” are, even if they have heard the term tossed around before. To put it simply, tax shelters are places where you can put your money to protect it from the IRS, and yes, they are legal...at least when they’re taken advantage of in the right way.  

While you might think tax shelters are something fancy, the kind of thing that only rich people bother with, that’s not true. In fact, if you have a 401(k) or even home equity, then you have a tax shelter of your own. And, chances are, there are more you can and should be taking advantage of as well.

Deductions

One of the more common types of tax shelters comes in the form of deductions, which allow you to basically not pay taxes on items that you have deducted. There are actually all kinds of things that can be legally deducted, such as charitable donations, medical expenses past a certain amount, student loan interest, and more. Make sure that your accountant and/or tax adviser is helping you to get all of the deductions for which you qualify.

Home Equity

We mentioned earlier that home equity can be a type of tax shelter, and that’s certainly true. Should you decide to sell your home, the IRS will deduct as much as $500,000 (for married couples; single people only get a $250,000 deduction) of your profits from capital gains taxes, meaning you get to enjoy a large chunk of the profit- maybe even all of it- without paying taxes.

Your Child’s College Fund

Finally, if you’ve done the responsible thing as a parent and have stashed money aside for your child or children’s future education...or even for your own education, you can avoid paying taxes on that money by stashing it via the 529 college savings plan.

As you can see, there are all kinds of tax shelters to take advantage of where you can, so start finding smart ways to save money, such as the options discussed here, today!