Archives February 22, 2021

Understanding what State Income Tax Rate is.

Every state imposes income tax on its residents. State income tax works in three ways. A state may impose a progressive income tax, a flat tax, or no tax at all. As compared to the federal income taxes, state income taxes are not talked about often. However, state income tax laws can significantly affect your earnings, savings, and lifestyle. Thus, consulting a tax law firm becomes crucial when filing state income tax returns.

What is a state income tax?

As the name implies, a state income tax is imposed on the income earned in that state. While federal income is similar to the state income tax, the latter is used to fund state budgets.

So, how do state income tax rates work?

Every state in the U.S uses one of the three approaches to impose a tax on its residents.

  • No tax: A state may choose not to levy any state income tax on its residents.
  • Flat tax: A state may tax all income or dividends at the same rate.
  • Progressive tax: A state may choose to impose a higher income tax on people with higher taxable incomes.

If you live and work in the same state, you will need to file only one state income tax return each year. However, if you moved to another state or lived and worked in different states or income-producing properties in multiple states, you will have to file several income tax returns. If you fall into the latter category, consulting an experienced taxation lawyer will help you avoid confusion over filing the return.

States with no income tax

In the U.S, eight states don’t levy an income tax. These states are Texas, Nevada, Alaska, Florida, South Dakota, Tennessee, Wyoming, and Washington. Additionally, New Hampshire imposes a 5% tax on interest and dividends.

While one might be tempted to move to states with no income tax, the chances are that other taxes like property taxes, sales taxes might be higher than usual.

States with flat income tax rates

In the U.S, ten states levy flat income tax rates on their citizens. However, what is considered as ‘income’ in these states can be different than other states. In comparison, some states apply income tax rates on adjusted gross income, while some states levy tax on taxable income.

States with progressive tax structures

A majority of U.S states tax income similar to the federal government. States with progressive tax rates levy higher income tax on residents who earn a higher income. Most states charge lower income tax as compared to the federal government. Many state income tax rates range between 1% to 10%. While states with high-income tax charge anywhere between 13% to 14% tax. Besides this, there are other taxes like sales taxes, fuel taxes, utility taxes imposed on the residents.

If you live in a state with a progressive tax structure, you must seek help from a tax law firm to prevent income tax filing mistakes.

Four Steps On How To Effectively Get Started On Estate Planning Amidst COVID-19

The COVID-19 pandemic has changed people’s perspectives and most have gravitated their attention towards their futures, security, and safety.

Aside from the fear of COVID-19 transmissions, most medicare lawyers near me share a common consensus that people are more conscious about their state of health, finances, and the welfare of their families in the event of an untimely death.

Many compelling factors have made people review their financial status and consider finding help for estate and probate planning that was brought to the limelight by the Coronavirus crisis such as lower valuation, lower interest rates, and high estate and gift exemptions.

If you are going the route of initiating your estate planning goals, you could start searching for legal support from wills and estate lawyers near me.

To get you started, here are the four basic steps to get you going on your estate planning strategy.

Conduct an estate plan review

Having a simple estate review plan will help you understand and assess your options in the event of an untimely death.

Your review and assessment could include determining where your assets would go or who are your heirs to it, estimated estate tax owed to the government upon your passing, and your liquidity analysis of how your estate taxes would be paid.

Re-assess your current estate plan and check if it could achieve your goals

If you have an existing estate plan, you can weigh your options based on the current conditions and see if it would help you achieve your goals such as if it is still compatible with what is important to you, will it help you have peace of mind, or if it will give you the confidence that you are leaving a good legacy.

Discuss your current plans with your wills or estate lawyer

 If you need to make adjustments or modifications to your estate plans, then this is the stage where you discuss it with your estate attorney.

Your attorney would be the best person to help give you a thorough evaluation of your plan and see if your revised preferences would be compatible with your plan or if there are better options to work with that may not have entered your mind.

Finalize your estate plan

Once you have accomplished all the steps, then it’s time to finalize your estate plans such as drafting or revising the provisions of your document, obtain the valuations, and initiate the filing of your appropriate tax returns.