Understanding Property Tax

All homeowners are required to pay property taxes. But how deep really is our understanding of these taxes? Sure we know that they depend on the value of the property and the tax rate at the time. However, are there other important information about them that we should be aware of?

Real versus Personal

There are two major categories of property: real and personal. Generally, real properties include land and other immovable features built or installed on it. Some examples of them are houses, apartments and shopping centers.

Meanwhile, personal properties are those that are not covered by the real category. They can be any items that are not attached to the land and are oftentimes mobile. For instance, livestock, cars and computers. But for clarity sake, real properties are further divided into two subcategories: tangible and intangible. Falling under the tangible group are physical objects such as those mentioned above, while under the intangible group are physical attributes such as patents and copyright.

It is essential to know these things and the categories where they belong because the rates used for taxing them vary.

Property Tax

Now, you must be familiar with the tax on your residential property. This, as you must know, is that tax charge yearly on your primary residence. This is calculated by determining the market value of your property, the applicable deductions and the tax rate. Once you have taken away the necessary deductions from the market value, then the result will be multiplied by the tax rate.  Keep in mind that the tax rate and the applicable deductions depending on what state you are in; which is why it is recommended to call your local tax officer.

More often than not, you can file a tax appeal during the reassessment of your property. If you feel that your property has not been assessed properly, it is probably best to consult a property tax lawyer or a tax consultant regarding your concerns.

Exemptions and Incentives

Yes, there are also exceptions in property taxes, thus you might want to verify if you qualify for them. Usually, senior citizens and the handicapped are off the hook.

Similarly, you should also be in the know when it comes to different tax incentives of the properties you have. Confirm if you qualify for any of the incentives offered by the government to first time buyers. If you are in the dark, then better consult your property tax lawyer about this.

Moody’s: Obama Tax Package Hurts US Credit Rating

Credit ratings agency Moody’s recently warned that President Barack Obama’s planned tax package could result in a negative outlook for the US’ AAA long-term credit rating.

The fiscal proposals aim to extend all of the previous administration’s income tax cuts by two years, retain unemployment insurance for 13 months, and introduce a 2% cut in the payroll tax this year. According to Moody’s, such fiscal policies might worsen the national fiscal deficit and level of public debt.

The agency does foresee prospects for additional tax revenues as the US economy recovers in the next two years following the likely passage of the policy. However, it sees such benefits being outweighed  by the reduced tax collected, and higher benefits paid out by the government.

Unless accompanied by other counterbalancing measures, such as reductions to government spending, Moody’s therefore predicts a downgrading of the country’s credit outlook in the next two years.

What you Need to Know About Income Tax Programs

Nowadays, almost every household in America has at least one computer and Internet access. This has changed the lifestyle and methods of doing different things. Education, shopping, paying bills and communicating have become cheaper and more convenient. Another means that the Interne access has made a lot easier is the filing of taxes. In 1998, Congress required that by the year 2007, 80 percent of all tax returns be filed electronically. A lot of people prefer it that way, because it is much easier. Now, there are available income tax programs that give taxpayers an alternative to traditional tax preparation services and their fees.

The electronic filing of taxes was introduced by the Internal Revenue Service in 1986 through authorized agents. In 1993, the IRS finally approved income tax programs in which taxpayers would fill out tax forms, print and mail them to the IRS electronically.

Preparing and filing using an income tax program is quick and easy. In addition, most programs available offer assistance against an IRS audit. The software is guaranteed to be up-to-date on the latest tax changes. According to users, it offers help and support in every aspect necessary.

How long does it take to file and receive refunds?

The available income tax programs allow taxpayers to prepare and file tax returns in a much faster and more convenient way. Also, tax refunds can arrive as early as 8 days after filing the forms electronically through an income tax program. This is a week earlier than receiving the refunds in a paper check.

What benefits does the program offer?

The software programs help the taxpayers to minimize, if not eliminate, errors. They also help users to make the necessary adjustments by suggesting errors that might not otherwise be found, and review returns for errors that might have lead to an audit.

What other options are available when filing online?

The IRS has partnered with different programs that can prepare the tax returns for free and file them electronically. The IRS website offers these services through their website. However, there is an adjusted gross income limit of $56,000.

What else do I need to know before using the program?

before purchasing or downloading an income tax program, you should verify if it’s compatible with your computer’s operating system first. Also, check for any available program updates after installation to ensure the product’s accuracy. Once in a while, check whether there are changes and updates in the software.

How to Reduce Tax on a Decedent’s Gross Estate

A rich decedent’s estate taxes can be a considerable amount and can take a big part of the assets left to the beneficiaries. The exempted amount of an estate that can be transferred tax-free differs every year.

For instance, back in 2009, the exemption amounted to $3.5 million; however in 2010, estate taxes will have been erased until 2011, when it reaches the brink of $1 million. It is still debatable where the exemption will lead to, but any individual with a gross estate valued more than the current exemption needs to evaluate their tax reduction options.

Spousal Exemption

The whole amount of the estate is passed to the surviving spouse, with no tax whatsoever. However, if there are children who are to become heirs to the estate upon the spouse’s death,  then the taxes will just be postponed. This is usually the case for those people who don’t have much assets. For people with bigger estates, spousal transfer is not encouraged when looking at it in the long-term point of view.

Lifetime Gifts

A single individual may give gifts amounting to $12,000 annually ($24,000 per married couple filing jointly) without having to pay for gift tax. This gives the gift giver the chance to see how their gifts were received while they’re still living; and it also decreases their estate’s value. A married couple with a number of children can gradually give away part of their money to decrease the size of their estate until it reaches the point where the value is less than the exemption, which would result to the elimination of virtually all taxes on the estate.

Irrevocable Life Insurance Trusts

Another way to decrease the size of an estate and reduce its tax is through life insurance. In this case, one would have to make regular payments to it, the same way they would do in an insurance premium. This then grows separate from the estate. Not only does life insurance trusts decrease the size of the estate, they are also not as expensive and will eventually lead to life insurance proceeds that are free from tax.