You may be eligible for a valuable incentive, which could reduce your federal income tax liability, for contributing to your company’s 401(k) or 403(b) plan. If you qualify, you may receive a Tax Saver’s Credit of up to $1,000 ($2,000 for married couples filing jointly) if you made eligible contributions to an employer sponsored retirement savings plan. The deduction is claimed in the form of a non-refundable tax credit, ranging from 10% to 50% of your annual contribution.

Remember, when you contribute a portion of each paycheck into the plan on a pre-tax basis, you are reducing the amount of your income subject to federal taxation. And those assets grow tax-deferred until you receive a distribution. If you qualify for the Tax Saver’s Credit, you may even further reduce your taxes.

Your eligibility depends on your adjusted gross income (AGI), your tax filing status, and your retirement contributions. To qualify for the credit, you must be age 18 or older and cannot be a full-time student or claimed as a dependent on someone else’s tax return.

Use this chart to calculate your credit for the tax year 2022. First, determine your AGI – your total income minus all qualified deductions. Then refer to the chart below to see how much you can claim as a tax credit if you qualify.

Tax Filing status - adjusted gross income for 2022

For example:

With the Tax Saver’s Credit, you may owe less in federal taxes the next time you file by contributing to your retirement plan today!

Given the careful consideration to financial planning and changing tax legislation, Acumen Wealth Advisors would like to provide some general tax reminders as well as guidance regarding the reporting of strategies you may have implemented in the 2021 tax year.  As a courtesy, we have tried to include information which may pertain to you.  However, we are not tax professionals and encourage you to consult with one in filing your return.

Charitable Deduction – The CARES Act allowed for individuals to take up to a $300 and those filing jointly to take up to $600 above-the-line deduction for cash donations made to qualified non-profit organizations in 2021.  If you are taking the standard deduction, be sure to claim this deduction if you have donated.  If you are itemizing your deductions, be sure to report all charitable contributions made for the year. 

HSA Deduction – We believe an HSA is one of the most tax efficient accounts available as contributions (up to the limit) are deductible on federal taxes (and some state taxes), growth is tax free, and distributions for qualified medical expenses are non-taxable.  If you are a participant in a high-deductible health plan which is HSA eligible, you should be able to contribute to the plan for the 2021 tax year until April 15th.  The individual limit for 2021 is $3,600 and $7,200 for family coverage.  If you are age 55 or older you can contribute an additional catch-up contribution of $1,000 per year.

Capital Gains – With the increased need for active portfolio management, Acumen’s Portfolio Management Committee implemented many changes in 2021 to client portfolios.  As a result, there may be additional capital gains liability for the 2021 tax year.  Nonetheless, Acumen strives to minimize short-term gains and defer gains to another year when and if appropriate and in line with our investment thesis. 

529 Plan Contribution – You may reside in a state and have a state-sponsored 529 plan for which contributions are deductible from state income tax, up to a limit.  Tennessee is not a state for which 529 plan contributions are deductible on a state tax return.  Since we are not able to track contributions for 529 plans for which we are not the investment adviser, it is up to you to report contributions yourself, to your tax preparer, or to us so we can research the deductibility of contributions for your state. 

2021 RMDs – Remember you can direct some or all your RMD amount to a qualified non-profit organization for a Qualified Charitable Distribution.  These funds will result in a distribution which will not count as taxable income while also fulfilling your RMD.  Charles Schwab will not track the taxability of these distributions.

IRA Contributions – The deadline to contribute to a Traditional, SEP, or Roth IRA for the 2021 tax year is April 15, 2022.  For Traditional and ROTH IRAs, the limit is $6,000 unless you are 50 or older which allows you to contribute $7,000.  Contribution eligibility, amount, and deductibility is based upon income.  Please reach out to us if you would like to make this contribution so we can assess which IRA type is appropriate to fund.

Please feel free to reach out regarding any questions you may have.

This document is provided as a courtesy for informational purposes only. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

The September 13th tax proposal included numerous tax changes that could directly impact many of our clients.  The Build Back Better framework, released by the White House last week on Thursday, October 28th, removed many of the initial provisions including the attack on backdoor and mega-backdoor Roth conversions.

The tax proposal released last week would include two key tax changes:

  1. Net Investment Income Tax (NIIT) would apply to S Corp profits if the taxpayer’s Modified Adjusted Gross Income (MAGI) exceeds $400,000 for a single filer ($500,000 for married filing jointly.)  The current NIIT of 3.8% does not currently apply to S Corp earnings but would apply if the bill passes.
  2. The proposed “Surtax” threshold has now been increased to taxpayers with MAGI over $10 million.  A surtax of 5% would apply to income over $10 million and an additional 3% (total of 8% = 5% + 3%) would apply to MAGI over $25 million. 

Increased capital gains and ordinary income tax rates, targeting of Roth accounts, a reduced estate tax exemption, extension of the child tax credit past 2022, and strict limitations on grantor trusts were all absent from the released draft.

However, just as Roth accounts were taking a sigh of relief… as of November 4th the latest tax proposal being passed around has reinstated scrutiny on retirement accounts. This week’s latest round of proposed tax legislation introduces a few more key changes:

3. Retirement savers with large account balances could face additional scrutiny and required minimum distributions. IRA accounts will be prohibited from holding any securities if the issuer requires a certain minimum level of assets or income. Individuals with combined account balances more than $10 million will face required minimum distributions of 50% of the amount that exceeds $10 million. This will apply to taxpayers above certain income thresholds ($400k individual, $450k for a joint return.)

4. Beginning after 2028 further contributions to Roth or traditional IRAs will be banned for anyone with account balances exceeding $10 million who also has income above $400k ($450 for a joint return.)

5. Back door Roth contributions would be disallowed starting in 2022 regardless of income level. The back door may officially be closed at the end of this year.

6. Limits on Roth conversions are back starting after 2031.  This limitation would impact taxpayers with income over $400k ($450k for a joint return.)

Based on the back and forth over the past week, it is hard to say what will actually make the final bill. The roller coaster ride continues, but we will make sure to stay on top of the proposed changes as the conversations continue.

The opinions expressed in this commentary should not be considered as fact. All opinions expressed are as of the published date and are subject to change. Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. Investments in securities involves risk, will fluctuate in price, and may result in losses. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.   It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

Debate continues in Washington over the proposed tax changes contained in the Build Back Better Act and the Bipartisan Infrastructure Bill.  These tax proposals would raise the top marginal income tax rate from 37% to 39.6%.  The increased top marginal rate, combined with the expanded 3.8% net investment income tax, would apply to active business income.  In addition, a new 3% surcharge for high-income taxpayers with adjusted gross income above $2.5 million ($5 million for married couples) creates a maximum federal tax rate of 46.4%.  The maximum capital gains tax rate would increase from 20% to 25%, but earlier the proposed rate was as high as 39.6%.  While both proposals contain numerous provisions affecting both individuals and businesses, one key area under scrutiny in both proposals are Roth IRAs.

You may have seen news articles pointing out Peter Thiel’s $5 billion Roth IRA was originally funded with $2,000 worth of his initial PayPal shares.  Coincidence or not, restrictions on Roth IRAs are very likely to be implemented under the current tax proposals.  Wealthy savers won’t be allowed to contribute to Roth or traditional IRAs if the combined value of their defined contribution plans exceed $10 million in the prior year.  This would apply to single individuals earning more than $400,000 or married joint filers earning more than $450,000.  Furthermore, “back-door” Roth conversions of after-tax traditional IRA or 401(k) will be off limits for those earning more than $400,000 per year.  Historically through “Mega-backdoor” Roth conversions, wage earners could contribute up to $58,000 in after-tax money to a 401(k), roll it into an IRA, and then make a Roth conversion.  This process would be banned for everyone.  “Backdoor” and “mega-backdoor” limitations would be banned starting in January 2022.  All Roth conversions would be banned for high-income earners starting in 2032.

If the combined balance of an investor’s IRA, Roth IRA, 401(k) and other defined benefit plans exceeds $10 million, they would be required to distribute the excess balances.  The new required minimum distribution (RMD) would be 50% of any amount over $10 million.  An RMD of 100% would apply to any balance beyond $20 million.  Mr. Thiel could be facing a rather large RMD with a 40% tax rate.

It is important to note the estate tax exemption is proposed to return to the pre-Tax Cuts and Jobs Act limit of $5 million in 2022.  This exemption creates a significant estate tax issue for some who were not previously exposed to estate taxes under the higher estate tax exemption.  With more estates being affected by estate tax, it is possible to avoid an estate tax trap using Roth accounts.  Traditional IRAs are subject to estate tax and essentially taxed on an embedded income tax liability.  To help illustrate this scenario, assume a $1 million traditional IRA is within an estate subject to estate tax.  The $1 million traditional IRA would be subject to a 40% estate tax.  However, when the $1 million is distributed to the beneficiaries, the distribution would be subject to ordinary income tax, potentially at 39.6%.  The net cash after estate tax and ordinary income tax on $1,000,000 would only leave $204,000 remaining.  If this $1 million traditional IRA was converted to a Roth IRA in 2021 and we assume the highest tax rate of 37%, the resulting Roth would be subject to estate tax, but not the ordinary income tax on distribution.  While it’s never fun to pay a 37% tax rate, this strategy could generate $174,000 in tax savings as shown here:

Example Savings

Traditional IRA$1,000,000Roth IRA$1,000,000
Cash outside of IRA$370,000Cash outside of IRA (After Tax on conversion)$0
Estate Tax($548,000) ($400,000)
Ordinary Income tax on distribution($396,000) $0
Net Cash$426,000 $600,000
Savings$174,000

There may be an extra incentive for 2021 Roth conversions even at higher ordinary income tax rates, especially for those with estate tax considerations.  Keep in mind the tax proposals are still being negotiated.  However, Roth conversions and the estate tax exemption are both known points of scrutiny.

This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. The opinions expressed in this commentary should not be considered as fact. All opinions expressed are as of the published date and are subject to change. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.   It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

Last week the House Ways and Means Committee released a draft of Biden’s proposed tax legislation.  Acumen’s team is diligently staying focused as changes occur to advise our clients.  None of these changes have yet to become law, but we anticipate major changes on the horizon.  We would like to share a few key highlights from the potential legislation: 

Individual Tax

Retirement Planning

Business Tax

Estate Tax

The opinions expressed in this commentary should not be considered as fact. All opinions expressed are as of the published date and are subject to change. Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. Investments in securities involves risk, would fluctuate in price, and may result in losses. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.   It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

This checklist can help guide your conversations regarding the highlights of President Biden’s tax plan. Please take a look at this and the companion piece “As A High-Income Taxpayer, How Might President Biden’s Tax Plan Affect Me?” and consider how these resources may be of use to you. You may find this checklist on Acumen’s Resources page: How Might President Biden’s Tax Plan Affect Me?

If you’d like to discuss your personal situation and learn more about how Acumen can help you Invest Intentionally®, please contact us.

Schedule a Meeting

Our mission is to help you and your family Invest Intentionally®.
Contact us today to start your journey.

Start your journey

This report is provided as a courtesy for informational purposes only. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. This information is hypothetical in nature as no tax plan has been finalized as of publication. The final tax plan could vary.

Report Not a Solicitation
Do not act or rely upon the information in this publication without seeking the services of competent and professional legal, tax, or account counsel.

Report Does Not Provide Legal, Tax, or Accounting Advice
This report does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice
specific to your situation.

For More Information
You should seek the services of your legal and/or tax advisors when making financial decisions. It is also recommended that you visit the IRS website at www.irs.gov for additional information.

Acumen Wealth Advisors, LLC® is a Registered Investment Advisor. Advisory service are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licenses or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may
be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

President Biden’s administration has outlined a tax policy built upon the agenda introduced during his campaign. Biden’s tax plan focuses on raising taxes on corporations and affluent households, while increasing credits for moderate- to lower-income households. With Democratic control of Congress, changes outlined in President Biden’s tax plan have an increased possibility of becoming a reality. At what time, in what form, and to what extent remains to be seen; however, another round of tax law changes is likely on the horizon.

Having adapted to frequent, and sometimes major, legislative changes in recent years (namely the TCJA, the SECURE Act, the CARES Act, and most recently, the American Rescue Plan Act), you may be understandably concerned about what changes could be imminent. High-income households, in particular, have been targeted for tax increases under Biden’s tax plan.  By familiarizing yourself with President Biden’s tax plan now, you can be positioned to take action and seize planning opportunities when changes are implemented.

Take a look at this checklist to help guide you through conversations regarding the highlights of President Biden’s tax plan, along with the companion piece “How Might President Biden’s Tax Plan Affect Me?”.

You may find this flowchart on Acumen’s Resources page: As a High-Income Taxpayer, How Might President Biden’s Tax Plan Affect Me?

If you’d like to discuss your personal situation and learn more about how Acumen can help you Invest Intentionally®, please contact us.

Schedule a Meeting

Our mission is to help you and your family Invest Intentionally®.
Contact us today to start your journey.

Start your journey

This report is provided as a courtesy for informational purposes only. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. This information is hypothetical in nature as no tax plan has been finalized as of publication. The final tax plan could vary.

Report Not a Solicitation
Do not act or rely upon the information in this publication without seeking the services of competent and professional legal, tax, or account counsel.

Report Does Not Provide Legal, Tax, or Accounting Advice
This report does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice specific to your situation.

For More Information
You should seek the services of your legal and/or tax advisors when making financial decisions. It is also recommended that you visit the IRS website at www.irs.gov for additional information.

Acumen Wealth Advisors, LLC® is a Registered Investment Advisor. Advisory service are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licenses or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

Income tax planning is critical to solid financial planning. Navigating our complicated federal pay-as-you go income tax system can be difficult. Adding further complexity, you must understand and adapt to changes in tax laws and in your personal circumstances. In each tax year, it is important to ensure you are properly paying your federal income tax liability in order to avoid penalties. Frequently, you may need to make estimated payments to avoid penalties for late payments and/or underpayments.

We have a flowchart to help you guide through an estimated payments analysis. The decision points identify factors that may trigger a need to make or increase estimated payments, including:

You may find this flowchart on Acumen’s Resources page: Do I Need to Start Making Estimated Federal Income Tax Payments for 2021?

If you’d like to discuss your personal situation and learn more about how Acumen can help you Invest Intentionally®, please contact us.

This report is provided as a courtesy for informational purposes only. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.

Report Not a Solicitation
Do not act or rely upon the information in this publication without seeking the services of competent and professional legal, tax, or account counsel.

Report Does Not Provide Legal, Tax, or Accounting Advice
This report does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice specific to your situation.

For More Information
You should seek the services of your legal and/or tax advisors when making financial decisions. It is also recommended that you visit the IRS website at www.irs.gov for additional information.

Acumen Wealth Advisors, LLC® is a Registered Investment Advisor. Advisory service are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licenses or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

Schedule a Meeting

Our mission is to help you and your family Invest Intentionally®.
Contact us today to start your journey.

Start your journey

Retirement is a whole new phase of life. You’ll experience many new things, and you’ll leave others behind – but what you won’t avoid is taxes. If you’ve followed the advice of retirement plan consultants, you’re probably saving in tax-advantaged retirement accounts. These types of accounts defer taxes until withdrawal, and you’ll probably withdraw funds in retirement. Also, you may have to pay taxes on other types of income – Social Security, pension payments, or salary from a part-time job. With that in mind, it makes sense for you to develop a retirement income strategy.

Consider when to start taking Social Security. The longer you wait to begin your benefits (up to age 70), the greater your benefits will be. Remember, though, that currently up to 85 percent of your Social Security income is considered taxable if
your income is over $34,000 each year.

Be cognizant of what tax bracket you fall into. You may be in a lower tax bracket in retirement, so you’ll want to monitor your income levels (Social Security, pensions, annuity payments) and any withdrawals to make sure you don’t take out so much that you get bumped into a higher bracket.

Think about your withdrawal sequence. Generally speaking, you should take withdrawals in the following order:

These factors are complex, and you may want to consult a tax professional to help you apply these tips to your own financial situation. You can test different strategies and see which ones can help you minimize the taxes you’ll pay on your savings and benefits.

To learn more about how Acumen can help you Invest Intentionally®, please contact us.

ACR# 3493422 03/21


 
Acumen Wealth Advisors, LLC® is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place. Acumen Wealth Advisors, LLC® is affiliated with RPAG and utilizes their robust retirement plan consulting tools and resources to deliver enhanced value to plan sponsor clients. RPAG™, a wholly owned subsidiary of NFP (NFP Corp.), provides retirement advisors premier technology, systems, training, and resources through its practice management platforms.

In light of Tax Day arriving in a couple days, we thought you might enjoy this article we found with some interesting facts about taxes through the years.

By   

INCOMING!

“Fun tax facts” may seem like an oxymoron, but sometimes taxes can be amusing. From a tax on beards in czarist Russia to an American astronaut who forgot to pay his taxes before heading into space, here are 50 unusual, funny, interesting — and sometimes practical — tax-related tidbits.

TAXES GO WAY BACK

Governments have imposed taxes for thousands of years. There are recordings of tax payments made in ancient Mesopotamia circa 2500 B.C. At the time, people who didn’t have money to pay taxes often had to pay with livestock, food, or labor.

WE TRIED A FLAT TAX

America’s tax laws have been in flux for generations and remain so to this day. The first income tax in the United States came about with the Revenue Act of 1861. A flat 3 percent tax on income above $800 was used to fund the Civil War and repealed 11 years later. In 1894, a new flat federal income tax was ruled unconstitutional by the U.S. Supreme Court. It was not until the 16th Amendment was ratified in 1913 that the federal income tax finally stuck for good.

TAX DAY USED TO BE IN MARCH

Federal tax returns were not always due April 15. In 1913, March 1 was the big day; in 1918 it was moved to March 15; and finally in 1954 the current Tax Day was established.

WITHHOLDING STARTED BECAUSE OF A CASH CRUNCH

In the 1940s, the government needed a steady flow of cash to fund the war effort. It passed the Current Tax Payment Act of 1943, which required that companies withhold income taxes from employees’ paychecks and make ongoing payments on employees’ behalf. Before this (from 1916 to 1943), Americans paid income taxes quarterly or annually.

FEW PEOPLE OWED AT FIRST

Before World War II, few individuals or families owed income taxes. Due to a high personal exemption, only 1.1 percent of working-age people filed a return, according to the Tax Foundation, and about 17 percent of those filers did not have to pay income taxes.

MANY PEOPLE PAY NO TAX NOW

According to the Tax Policy Center think tank, 43.4 percent of tax filers owed no individual income tax or had negative taxable income in 2018

THE AVERAGE REFUND IS WORTH THOUSANDS

As of Feb. 22, the average income tax refund was $3,143, according to the Internal Revenue Service. With 47.7 million individual returns processed, the IRS has paid out more than 38.5 million refunds.

1040EZ IS GONE

Because of the 2017 Tax Cuts and Jobs Act, the simple 1040EZ form is now gone, along with the 1040A and the standard 1040, which have all been replaced by a redesigned 1040 form.

EVEN EINSTEIN DIDN’T LIKE PAYING TAXES

Even Albert Einstein found taxes inscrutable. He once said, “The hardest thing in the world to understand is the income tax” (that is, according Leo Mattersdorf, the math genius’ tax preparer).

TAX PREP TIME ADDS UP

According to the IRS, the average time it used to take to complete a Form 1040 was 16 hours; a 1040A took seven hours; and a 1040EZ took five hours. Overall, the average was 13 hours. In 2019, the IRS processed more than 154 million individual tax returns, equivalent to about 83.4 million days’ worth of prep time.

THERE’S ONLY ONE WAY OUT

Aside from the nation of Eritrea in Africa, the United States is the only country that requires citizens to pay taxes on their income if they work and live outside the country. Some wealthy individuals have renounced their citizenship and moved to another country to avoid paying taxes.

THERE’S ANOTHER TAX DAY ON THE CALENDAR

Americans collectively had to work until April 19 last year — 109 days — to pay the country’s tax burden, according to the Tax Foundation, which has declared that date Tax Freedom Day. On a state-by-state basis, New York residents had to work the longest, until May 14. Residents of Alaska and Louisiana had the earliest Tax Freedom Day, April 4.

AMERICANS’ TAX BILL TOPS $5 TRILLION

Collectively Americans paid $5.1 trillion in federal, state, and local taxes last year — more than the combined cost of food, clothing, and housing, according to the Tax Foundation.

SEVEN STATES HAVE NO INCOME TAX

While there’s no dodging a federal bill, seven states do not have an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee tax only dividends and interest income.

STATES MAKE RESIDENTS PAY IN OTHER WAYS

States that don’t have an income tax get their revenue from other sources, such as sales or property taxes. In some cases, this actually places a higher tax burden on lower- and middle-income families. They could wind up paying a larger portion of their income to the state than high-income families.

TAXPAYERS GET $12,000 IN TAX-FREE EARNINGS

Even though the personal exemption ($4,050) has been eliminated under the 2017 tax reform law, the standard deduction has nearly doubled to $12,000, so single filers don’t pay federal tax on the first $12,000 they earned in 2018. For married taxpayers, the deduction is $24,000.

THERE’S NO PENALTY FOR REACHING A HIGHER BRACKET

Some people believe that moving into a higher tax bracket will net them less money in the end. But the United States uses marginal tax brackets, meaning the higher rate applies only to the earnings that fall within the higher bracket. If only a single dollar bumps a taxpayer into a higher bracket, only that one dollar is taxed at the marginal rate for that bracket.

TAXPAYERS DON’T ACTUALLY PAY THE TAX RATE FOR THEIR BRACKET

To illustrate the difference between the marginal tax rate for people in a particular bracket vs. their effective tax rate — the average rate they actually pay — the Center on Budget and Policy Priorities once estimated the tax burden for a family of four with income of $110,000. Although the family fell into the 25 percent bracket, after accounting for standard deductions and credits and the progressive tax system in the U.S., their effective income tax rate was only 6.2 percent.

TOP EARNERS PAY OVER 40 PERCENT OF ALL INCOME TAXES

According to the Tax Policy Center, the top 1 percent of earners in the United States paid 42.4 percent of all federal income taxes in 2018, up from 38 percent in 2017. The top 0.1 percent paid 21.9 percent, up from 18.9 percent in 2017.

LOTTERY WINNERS TAKE HOME MORE IN CERTAIN STATES

All winners of more than $5,000 in a lottery are subject to a 25 percent federal withholding tax, but state withholding taxes vary. In some states, such as California and Delaware, the withholding rate is zero. In Maryland, the withholding rate is 8.75 percent for residents and 7.5 percent for non-residents. And that’s just what the states take immediately; the winner may be required to pay additional taxes when filing a return.

THE HIGHEST TAX BRACKET HAS BEEN MUCH HIGHER

Today, the highest marginal income tax bracket is 37 percent, but it has been much higher. The Individual Income Tax Act of 1944 raised tax rates to the point where the highest bracket was 94 percent.

THERE COULD HAVE BEEN A 100 PERCENT INCOME TAX

A few months after the attack on Pearl Harbor, President Franklin D. Roosevelt proposed a 100 percent income tax. In a letter to Congress, he wrote that in this time of “grave national danger … no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year” (equivalent to about $419,370 today).

HOUSTON, WE HAVE A PROBLEM

Astronaut Jack Swigert, the command module pilot for Apollo 13, got the assignment at the last minute because of health concerns surrounding another astronaut. In the rush, Swigert neglected to file his taxes. According to the transcript of the moment he realized his mistake, the crew on the ground thought he was joking, but Swigert was seriously asking how to file an extension.

TAXPAYERS FIND LOTS OF WAYS TO FOOL THEMSELVES

While some people claim unintentional mishap when the IRS audits them, others have made it a point not to pay taxes. Common arguments or tactics include claiming that the 16th Amendment was not properly ratified, that filing violates Fifth Amendment rights, or that the taxpayer has taken a religious vow of poverty. Others believe they can form a trust to hide taxable income. The IRS says it will help taxpayers who were misled to believe such myths.

CELEBRITIES ARE JUST LIKE (SOME OF) US

Even celebrities and business tycoons run into problems when they don’t pay their taxes. Pamela Anderson once had a $1.7 million lien against her for unpaid taxes. Duane Chapman, also known as Dog the Bounty Hunter, has owed up to $2 million in unpaid taxes at a time. Perhaps the best-known celebrity tax dodger is Wesley Snipes, who spent three years in prison and continued to battle the IRS afterward.

THERE’S MONEY IN WHISTLEBLOWING

The IRS pays people to provide information on someone who did not pay taxes. The whistleblower can get up to 30 percent of what the IRS collects in back taxes, penalties, and interest.

DO THE CRIME, PAY THE TAX

Even money earned illegally is subject to tax. Some states require drug dealers to pay taxes on the drugs they sell. The tax may be due as soon as the drug is in their possession, meaning someone caught with drugs may have to pay a fine for unpaid taxes on top of punishment for their other crimes. To pay the tax anonymously, dealers can buy tax stamps and affix them to containers of controlled substances.

THERE CAN BE PRETTY KILLER COSTS FOR TAX EVASION

Violent Chicago mobster Al Capone famously got caught on tax evasion charges. Other mobsters, including Al’s brother Ralph “Bottles” Capone, Frank Nitti, and Jake “Greasy Thumb” Guzik, were also charged. Among his debts to society, Al Capone had to pay $215,000 plus interest in back taxes.

A NEW TAX LAW MADE CHILDREN ‘DISAPPEAR’

An IRS rule change in 1987 required taxpayers to list dependents’ Social Security numbers for the first time. As a result, about 7 million children — a tenth of all dependent children in the country at the time — “disappeared.”

TAXES HAVE MADE DELAWARE THE CORPORATE CAPITAL OF THE U.S.

Delaware has a low 8.7 percent flat tax on corporations, likely the reason about half of all publicly traded companies in the country consider it home. A single address in Wilmington, 1209 North Orange St., is the legal address of more than 300,000 companies.

THE U.S. USED TO HAVE ONE OF THE HIGHEST CORPORATE TAX RATES

The top marginal corporate tax rate in the United States (38.92 percent) was previously the fourth-highest in the world, exceeded by Puerto Rico (39 percent), Comoros (50 percent), and the United Arab Emirates (55 percent). But that has changed. The recent Tax Cuts and Jobs Act slashed the corporate tax rate to 21 percent, a little below the worldwide average of nearly 23 percent.

PROFITABLE CORPORATIONS SOMETIMES PAY NO TAXES

In spite of their size and the corporate tax rate, some large corporations have an effective federal income tax rate of zero, or even negative. In the past several years, non-payers have included General Motors, telecom provider Level 3 Communications, and the airline United Continental.

EVEN ANCIENT GREEKS HAD TAX GRIPES

Observations and complaints about unfair tax payments go back to at least the ancient Greeks. Plato once said, “Where there is an income tax, the just man will pay more and the unjust less on the same amount of income.”

MADISON SQUARE GARDEN GETS A PROPERTY TAX BREAK

Madison Square Garden, the iconic New York sports, music, and entertainment venue, has not had to pay property taxes since 1982. The arrangement was supposed to end after 10 years, according to then-mayor Edward Koch, but due to the disputed wording of the agreement, it remains in perpetuity. The break cost New York City over $48 million in 2016 alone.

SOME HOLIDAYS ARE MEANT TO BE COMMERCIAL

Several states, primarily in the southeastern part of the country, have annual sales tax holidays. Depending on the state and date, clothing, footwear, guns, school supplies, energy-efficient appliances, and other select items are exempt from sales tax for two to three days a year.

TAXES MAKE WITCHES BURNING MAD

Fortunetellers, astrologers, and witches were added to Romania’s labor code in 2011, meaning they have to pay income tax and contribute to the country’s social programs. Some witches cast curses on the government in response — although others felt it legitimized their work.

ARTISTS MAY WANT TO CONSIDER BECOMING IRISH

Ireland exempts up to 50,000 euros in profits from the sale of qualified artistic work from income taxes. Grants, awards, and prizes may also be tax exempt if they are related to the artist’s work.

STATES OFFER SOME ODD DEDUCTIONS

Some states offer residents very odd or specific tax credits or deductions. In Alaska, eligible whaling captains can deduct up to $10,000 for whaling-related expenses. In Hawaii, property owners may be able to deduct up to $3,000 in expenses related to maintaining a tree with historic or cultural value.

CANDY CAN BE COMPLICATED

What is the real difference between a Kit Kat and a 3 Musketeers? The former contains flour in its wafers, an ingredient that leads some states to label the Kit Kat a grocery item rather than candy. As a result, retailers may have to charge different taxes on the bars.

THERE’S A DIAPER DOUBLE STANDARD

Some states apply sales tax to children’s diapers because they are considered clothing. The same tax does not apply to adult diapers.

TAMPONS ARE OFTEN TAXED AS THOUGH THEY’RE OPTIONAL

Feminine hygiene products are a necessity for many women, yet most states impose a sales tax on their sale while exempting other necessities, including groceries and medication. There are growing international and domestic movements to end the tax.

SLICING A BAGEL CAN COST YOU

In New York, cutting a bagel turns it into prepared food, which means the store must add an 8.875 percent sales tax to the price.

SIN (AKA FUN) TAKES A TOLL ON A TAX BILL

Taxes on products or services that are considered harmful are referred to as sin taxes. Some examples include taxes on alcohol, tobacco, gambling, and even fast food. One example of a sin tax is Utah’s 10 percent tax on businesses that have nude or partially nude workers — in other words, strip clubs. The extra tax extends to drinks and food sold on the premises.

ENJOY THAT FREE BEARD

Beards are back in vogue, but there were times when having a beard was costly. During the 16th century, King Henry VIII imposed a tax on beards that increased with the wearer’s social status. Eventually the tax was dropped, but his daughter, Queen Elizabeth I, reintroduced a beard tax on anyone with more than two weeks’ worth of growth. In Russia, Peter the Great wanted to Westernize the country and required every man, except peasants and clergy, to buy a “beard token” to prove they had paid up. The tax lasted from 1698 to 1772.

LET THE SUN SHINE IN

Talk about taxes’ ability to darken a day — in 1696, a window tax was introduced in England and Wales. It was assessed as a flat property tax plus a tax based on the number of windows a home had. As a result, some people bricked up their windows and new buildings sometimes were designed with fewer windows. Scotland and France imposed similar taxes in the 1700s.

THE ROMANS TAXED URINE

In Roman times, urine and the ammonia within it were collected for uses such as tanning and laundering. Emperor Vespasian imposed a tax on the buyers of urine from public urinals. Today words for “urinal” in French, Italian, and Romanian are derived from the emperor’s name.

WHAT WAS THE CAP ON THE HAT TAX?

From 1784 to 1811, the British government taxed hats based on price. A stamp was pasted inside the hat, and anyone caught with a stamp-less hat had to pay a fine. At least one stamp forger was sentenced to the harshest penalty: death.

ENGLAND MAKES A CASE FOR THE BLACK-AND-WHITE TV

In England, residents must pay a license (or, ahem, licence) fee for each TV in their homes. The money from this annual fee goes toward funding the BBC. The cost is 150.50 pounds for a color TV and 50.50 pounds for a black-and-white TV. The blind pay half as much.

IN DENMARK, THE TAX COSTS MORE THAN THE CAR

U.S. car buyers pay sales tax, and there are fees for registering a vehicle, but they don’t come close to what Danish car buyers pay. Depending on the price of the car, the registration tax has been as high as 150 percent of the sale price.

IT’S NOT CERTAIN BEN FRANKLIN WAS FIRST WITH THAT FAMOUS QUOTE

As Benjamin Franklin said, “In this world nothing can be said to be certain, except death and taxes.” Although he’s often credited with the idea, that line comes from a 1789 letter, and similar quotes date to 1716 and 1724.

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