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D ETERMINING YOUR TAX LIABILITY

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DETERMINING YOUR TAX - PowerPoint PPT Presentation


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D ETERMINING YOUR TAX LIABILITY. 58. Gross income - Adjustments ____________________ Adjusted gross income - Deductions - Exemptions ____________________ Taxable income. D ETERMINING YOUR TAX LIABILITY. 58. Taxable income Tax - Credits + Other taxes ____________________ Taxes due.

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d etermining your tax liability
DETERMINING YOUR TAX LIABILITY

58

Gross income- Adjustments____________________ Adjusted gross income- Deductions- Exemptions____________________ Taxable income

d etermining your tax liability3
DETERMINING YOUR TAX LIABILITY

58

Taxable income

Tax- Credits+ Other taxes____________________Taxes due

m arginal tax brackets
MARGINAL TAX BRACKETS

59

Over $297,350

Over $297,350

39.6%

39.6%

$297,350

$297,350

36%

36%

$136,750

$166,500

*2001brackets

31%

31%

$65,550

$109,250

28%

28%

$27,050

$45,200

15%

15%

SINGLE

MARRIED FILING JOINTLY

m arginal tax brackets5
MARGINAL TAX BRACKETS

59

Over $148,675

Over $297,350

39.6%

39.6%

$148,675

$297,350

36%

36%

$151,650

$83,250

*2001brackets

31%

31%

$54,625

$93,650

28%

28%

$36,250

$22,600

15%

15%

MARRIED FILING SEPARATELY

HEAD OF HOUSEHOLD

d eductions and exemptions
DEDUCTIONS AND EXEMPTIONS
  • Standard or itemized deductions
  • Personal exemptions
  • Phaseout for high-income taxpayers
t ax credits
TAX CREDITS
  • Child care credit
  • Credit for the elderly or disabled
  • Earned income credit
  • Child tax credit
  • Education credits
f requently overlooked considerations
FREQUENTLY OVERLOOKED CONSIDERATIONS
  • Filing status
  • All possible exemptions
  • Withholding
  • Flexible spending accounts
t ax reduction strategies
TAX-REDUCTION STRATEGIES

63

1. Contribute to an employer-sponsored retirement plan or tax-deductible IRA

2. Convert nondeductible consumer interest

3. Donate appreciated assets

4. Document your deductible expenses

5. Consider your investments

h ome ownership
HOME OWNERSHIP
  • Mortgage interest
  • Real estate taxes
  • Sale of principalresidence exclusion
i ncome splitting
INCOME SPLITTING
  • Employment
  • Investments
t axing children s income
TAXING CHILDREN’S INCOME

Under Age 14Earned Income Rate

$ 0 - $4,550 Exempt

Over $4,550 Child’s Rate

Unearned Income Rate

$ 0 - $750 Exempt

$751 - $1,500 15%

Over - $1,500 Parents Rate

t ax favored investing
TAX-FAVORED INVESTING

66

1. Tax-exemptalternatives

2. Tax-deferredalternatives

t ax exempt alternatives
TAX-EXEMPT ALTERNATIVES
  • U.S. Treasury securities
  • Series EESavings Bonds
  • Municipal bonds
t ax deferred alternatives
TAX-DEFERRED ALTERNATIVES

Employer-sponsored retirement plans

  • Corporate pension plans
  • Profit-sharing plans
  • 401(k) and 403(b) plans
  • SEPs
  • SIMPLE plans

Keogh plansIRAs

e mployer sponsored retirement plans
EMPLOYER-SPONSOREDRETIREMENT PLANS

Savings Account Employer-Sponsored

Plan

Amount saved$10,500$10,500

Taxes (28%)(2,940)0

Amount saved, after taxes7,56010,500

Annual return (6%)454630

Taxes (28%)(127)0

Ending balance$7,887$11,130*

*The full value of the employer-sponsored plan will be subject to regular income taxes upon withdrawal.

a nnuities
ANNUITIES
  • Fixed
  • Variable
l ife insurance
LIFE INSURANCE
  • Whole life
  • Universal life
  • Variable universal life
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