We have a calculation of 4,540 plus 22% of the excess over 44,725. So once again, we have this layered system where we’re not taxing the entire amount at one flat rate. We’re taxing the first portion at a lower rate and then the excess at a higher rate. And finally, if you make over 95,375 but not over 150,000, we have a calculation of 14,652 plus 26% of the excess over 95,375. So as you can see, the tax rate increases as the income or tax base increases, which makes it a progressive tax system.

(more…)

The good news is that in most cases, if you received a refund from state or local income taxes in 2022, you will not need to include it in your taxable income. This is because you already paid taxes on that income in the prior year, and the refund is simply a return of those overpaid taxes. So, in general, tax refunds are not considered taxable income.

(more…)

A regressive tax system is one where the tax rate decreases as income increases, which means that lower-income earners end up paying a higher percentage of their income in taxes compared to higher-income earners. An example of a regressive tax is a sales tax or usage tax, where everyone pays the same tax rate regardless of their income level.

(more…)

In this blog post, we’ll be continuing our discussion on tax preparation and wealth preservation. Specifically, we’ll be focusing on creating a tax formula worksheet using Excel to help us double-check the data input that we’re putting into the tax system and to help us visualize how the tax forms are populated. We’ll also be discussing some of the sub-schedules that make up Form 1040, including adjustments to income and the various income line items.

(more…)

Firstly, it’s important to note that income tax laws vary by country, and you should always seek professional advice before making any decisions based on the information provided here.

(more…)

Great, let’s continue working on the tax formula worksheet in Excel. In our previous session, we outlined the income tax formula, so now let’s focus on some of the key components of the formula and how we can incorporate them into our Excel worksheet.

(more…)

Filing taxes can be a complicated process, and understanding the different filing statuses is an important step in the process. In general, the filing statuses can be broken down into two categories: those who are married and those who are not. If you are not married, you typically have the option to choose between single, head of household, and qualified widow(er) or surviving spouse. If you are married, you can choose between filing jointly or separately. However, there are some gray areas that can complicate the determination of the filing status.

(more…)

As we approach the tax season, it is essential to understand the different filing statuses that the IRS recognizes for income tax purposes. Choosing the right filing status is crucial to minimizing your tax liability and maximizing your tax benefits. In this blog, we will go through some scenarios on filing status using Lacerte tax software to populate Form 1040.

(more…)

The standard deduction is an important factor in calculating taxable income for taxpayers. It is one of the “below the line” deductions that taxpayers can claim on their tax returns. In this blog, we will be discussing the standard deduction for tax years 2020 to 2023.

(more…)

Income tax is a necessary evil that all individuals and businesses have to deal with. The tax rates and rules can be quite complex, especially with the progressive tax system that the US has. In this blog, we will take a closer look at the income tax rates from 2020 to 2023, as well as the concepts of marginal and average tax rates.

(more…)