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Archive for the ‘StateTaxes’ Category

Prepaying Taxes

Posted by taxguru on December 28, 2017

The new tax law does include a lot of changes; some good and some not so good.  Remember that the word “Reform” just means to change shape, not always as an improvement for the better.  This latest reformation-reformulation of our taxation policies does, surprisingly, eliminate and reduce a lot of deductions that have been around at least since many years before I started preparing tax returns in 1975. 

I don’t have time to discuss too many of the changes right now, as I have been busy doing a lot of year-end consulting with clients.  However one big change does need to be covered ASAP.  In fact, the following is based on some emails I sent to clients earlier today, who had asked about the idea of prepaying their property taxes before the end of this month.

As has been widely publicized, the new tax law, effective for 2018, puts a $10,000 cap on Schedule A deductions for State and Local taxes, including property taxes on personal use property.  There is no such limit on deducting taxes on business or rental properties, which are shown on different schedules with the 1040.

For those in high tax states such as Calif, this upcoming limit does have many people choosing to prepay some of their State and Local taxes before the end of 2017 in order to claim them without the limit on their deductibility.

There are special rules for deducting property taxes that do prevent too much prepayment.  The taxes paid and deducted have to be actually assessed and thus a true current liability. In Calif, the current year 2017/18 taxes are payable half by October 10, 2017 and the other half by April 10, 2018.  This means you can send the county the money for the 4/10/18 installment by 12/31/17 and deduct it on your 2017 1040. 

This is also the case for other states that allow their property taxes to be paid in multiple payments, such as Oklahoma that has due dates of December 31, 2017 and March 31, 2018 for their2017/18 tax assessments.   

Since taxes for the 2018/19 and future years have not yet been assessed, any payments sent in for those years are not legally deductible.  This has been such a hot topic that IRS issued a press release on this issue yesterday.

IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017

Income Taxes

While the above discussion focuses on property taxes, it also applies to payments of State income taxes, which are included in the new $10,000 limit.  The final 2017 estimated tax payments for both IRS and the States are technically due January 16, 2018.  For the past few months, with the threat of this new limit looming, I have been advising clients to send in their final 2017 ES payment by 12/31/17 in order to definitely be able to claim it.  Since Federal income tax payments are not deductible anywhere, making that final payment for 2017 in December or January makes absolutely no difference of any kind.

Just as with the issue of timing of a deduction for property taxes, a similar concept applies to State income tax payments.  Since 2017 is almost over and income taxes on what you earned are already accruing, you are allowed to deduct payments for your 2017 State income taxes.  You re not technically allowed to prepay in 2017 for what you expect your 2018 income taxes to be because as of 12/31/17, you have no legal liability for any 2018 income taxes. 

However there is an easy way around this little technicality if you are desperate to maximize your 2017 State income tax deduction.  You could send your State a huge check postmarked by 12/31/17 for thousands more than your 2017 taxes could possibly be and have it all applied to your 2017 account with the State.  Later on, when you file your 2017 State income tax return, have the overpayment rolled over to your 2018 account. 

I should point out that this discussion also applies to those folks who are lucky enough to reside in one of the cities that require their residents to pay separate City income taxes.

 

 

Taxes Are Not Donations

While this limit on deducting State and Local taxes was being debated over the past few months, some people suggested just claiming those payments as charitable donations on their tax returns as a way to avoid the $10,000 limit.  That idea would not fly for some very basic reasons. 

While it is true that governments do qualify as charities and deductions can be taken for voluntary contributions paid to them, that isn’t how tax payments work.  First is the fact that a legitimate deductible charitable donation has to be completely voluntary with no strings attached and nothing of value can be received back in return for the payment.  Nobody can say with a straight face that paying property and income taxes is in any way voluntary, or that nothing is received in return for those payments.  Paying those taxes allows you to keep the property and stay out of prison. Those are quite valuable things you receive in exchange for the “contributions” paid to the State and County.  Anyone who tries that trick will hasten their trip to the hoosegow. 

 

TaxCoach Software: Are you giving your clients what they really want?

Posted in Deductions, NewTaxLaws, PropertyTax, StateTaxes | Comments Off on Prepaying Taxes

More Tax Refugees Flee Illinois

Posted by taxguru on December 13, 2017

It always makes me feel good when I see stories like this…

Illinois Drives People Away. The taxpayer migration continues from the Land of Ever Higher Taxes.

…because it gives me hope that eventually, people will reach their breaking point in terms of accepting being fiscally raped by their State Rulers.

As is the case with other high tax states (Calif, New York, New Jersey, et al) the Leftist Rulers will once again illustrate their ignorance of basic real world economics and attempt to remedy their financial shortfalls by soaking the remaining residents even more, as per the fantasy world teachings of their mentor, Karl Marx.  They never seem to have enough foresight to see where that leads – to even more people fleeing to lower or no tax states.

TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!

Posted in StateTaxes | Comments Off on More Tax Refugees Flee Illinois

More State Tax Refugees on the Way to Florida

Posted by taxguru on September 30, 2017

Just as with the Dim-Wits in power in the PRC, who believe the only answer to budget deficits is to soak their “evil rich” citizens even more, the Rulers in Illinois have the same formula for their financial shortcomings. 

It always warms my heart when I see stories such as this one, where State taxpayers finally reach their breaking point over being fiscally raped by their rulers and actually move to a lower tax state, which is frequently our new home state of Florida.

Fed-up Illinois homeowners consider moving: ‘It’s not just the property taxes on my home; it’s all of them’

The main problem with the growing population of tax refugees down here is the increased traffic congestion, especially when it comes to Hurricane evacuations.

Posted in StateTaxes | Comments Off on More State Tax Refugees on the Way to Florida

Another Fiscal Rape Victim Refuses to Prolong the Suffering

Posted by taxguru on April 11, 2016

I love stories like this, where those our rulers consider to have too much money decide that “enough is enough” and move to locations where they are allowed to keep more of their own things. 

Billionaire’s move puts New Jersey tax rates in spotlight

It would be such a great real world lesson to the spend-crazy rulers in State capitols around the country if they were to watch more of their Golden Geese fly away to lower tax locales. 

Posted in StateTaxes | Comments Off on Another Fiscal Rape Victim Refuses to Prolong the Suffering

Visiting State Income

Posted by taxguru on February 15, 2016

I couldn’t care less about the Super Bowl, but there is an income tax angle that warrants repeating once again. 

Having a tax home in a tax free state, such as here in Florida, is a common tax savings technique, especially with professional athletes and entertainers.  However, unless they do every single bit of their income earning work inside the borders of their home state, they may be required to file income tax returns and pay taxes to other states in which they played.

For Cam Newton, Adding Super Tax Insult to Super Bowl Injury

Taxman Coming for Super Bowl Champion Broncos

Posted in StateTaxes | Comments Off on Visiting State Income

Corp tax rates by State

Posted by taxguru on February 7, 2016

Tax Foundation has an interesting look at the different tax rates that the various states levy on corporations

State Corporate Income Tax Rates and Brackets for 2016 

It has long been a common tax savings technique to shift income from high tax states to those with low or zero State income tax rates.  When we were in California, we helped clients shift a lot of income from that state’s high rate corp tax to zero tax states, such as Washington and Nevada.

There are a number of requirements to do this legally and avoid problems with the high tax state agencies who obviously don’t like this strategy; so anyone considering doing this should work with an experienced professional tax advisor and not try this technique on their own.  

Posted in corp, StateTaxes | Comments Off on Corp tax rates by State

State Tax Rates Vary Widely

Posted by taxguru on September 1, 2015

The different tax rates levied by the various States have long been part of the tax planning analyses I have done for clients.  Occasionally, this has resulted in shifting some operations and income into lower tax States in order to save thousands of dollars a year in taxes.

 

Taxpayers Fleeing Democrat-Run States for Republican Ones – From Americans for Tax Reform

 

The Tax Foundation has just released a very comprehensive study of the effective tax burdens on several different kinds of business in each of the American States, plus DC.  They even contrast the tax rates for newer businesses versus more mature ones. The report is free to download and is an interesting tool for those considering the possibility of reducing their State tax burdens. 

The  article explaining the report

The report itself – 128 page PDF

 

TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!

Posted in StateTaxes | Comments Off on State Tax Rates Vary Widely

Beware of States that are desperate for money…

Posted by taxguru on June 27, 2015

Since fines and taxes are considered to be synonyms by some of our rulers, they will continue to look for more ways to squeeze money out of the public.  Charging thousands of dollars for minor traffic offenses is one way the bozos in charge of the PRC are pay for their insane spending programs.

‘All about the money’: Motorists plagued by sky-high Calif. traffic ticket fines

Posted in StateTaxes | Comments Off on Beware of States that are desperate for money…

Moving to lower tax states…

Posted by taxguru on June 23, 2015

I have always loved seeing stories such as this, where it’s apparent that not everyone is willing to bend over and let their State rulers fiscally rape them.

Tired of high taxes? Maybe it’s time to move

Posted in StateTaxes | Comments Off on Moving to lower tax states…

Moving Van Tax Savings…

Posted by taxguru on April 8, 2015

The kind of story that gives me some hope that not everyone agrees to just bend over, grab their ankles and let the States continue to fiscally rape them.

Report: People Fleeing High-Tax States for Low-Tax Alternatives

You can download the actual 58 page pdf of the full report mentioned in the above article here, Rich States, Poor States.”

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Posted in StateTaxes | Comments Off on Moving Van Tax Savings…