Understanding Tax Bracket for Tax Filing in 2019 for NR in the US

Understanding Tax Bracket for Tax Filing in 2019 for NR in the US

by | Mar 30, 2019 | global income tax, Tax credits, Tax Planning, Tax Preparation

Understanding Tax Bracket for Tax Filing in 2019 for NR in the US

The tax filing season for 2018 is just around the corner. However, the IRS has just released the updated tax brackets adjusted with inflation for 2019. If you are in the middle of tax filing for 2018, it is better to finish the same before moving to 2019 changes.

The latest iteration adjusts the tax brackets and certain credits according to inflation. But the first and foremost step is to figure out whether you are liable to file tax returns. The IRS’s website has a link which will help you identify whether or not you need to file returns.

However, the following simple criteria should help you understand the same. If your income exceeds these levels, you are liable to pay taxes. There still are seven tax brackets but there have been subtle changes to the income tax brackets.

  • 10% tax rate

    • If you are single and earn up to $9,700.
    • If you are married and filing jointly and earn up to $19,400.
    • If you the head of a household and earn up to $13,850.
    • If you are married but filing separately and earn up to $9,700.

  • 12% tax rate

    • If you are single and earn between $9,701and$39,475.
    • If you are married and filing jointly and earn between $19,401 and $78,950.
    • If you the head of a household and earn between$13,851 and $52,850.
    • If you are married but filing separately and earn between $9,701 and $39,475.

  • 22% tax rate

    • If you are single and earn between $39,476 and $84,200.
    • If you are married and filing jointly and earn between $78,951 and $168,400.
    • If you the head of a household and earn between $52,851 and $84,200.
    • If you are married but filing separately and earn between $39,476 and $84,200.

  • 24% tax rate

    • If you are single and earn between $84,201 and $160,725.
    • If you are married and filing jointly and earn between $168,401 and $321,450.
    • If you the head of a household and earn between $84,201 and $160,700.
    • If you are married but filing separately and earn between $84,201 and $160,725.

  • 32% tax rate

    • If you are single and earn between $160,726 and $204,100.
    • If you are married and filing jointly and earn between $321,451 and $408,200.
    • If you the head of a household and earn between $160,701 and $204,100.
    • If you are married but filing separately and earn between $160,726 and $204,100.

  • 35% tax rate

    • If you are single and earn between $204,101 and $510,300.
    • If you are married and filing jointly and earn between $408,201 and $612,350.
    • If you the head of a household and earn between $204,101 and $510,300.
    • If you are married but filing separately and earn between $204,101 and $306,175.

  • 37% tax rate

    • If you are single and earn above $510,300.
    • If you are married and filing jointly and earn above$612,350.
    • If you the head of a household and earn above$510,300.
    • If you are married but filing separately and earn above$306,175.

How to Assess?

The first step of assessing your tax liability, you first need to calculate all your sources of income. This total income amount at the end is known as the gross income. You can then apply all the adjustments and exemptions from your gross income. This then becomes your AGI or adjusted gross income. It works as the starting point for calculating your tax liability.

5 Things that a COUPLE be mindful of when FILING TAXES

5 Things that a COUPLE be mindful of when FILING TAXES

by | Mar 13, 2019 | Deduction & Credits, Tax credits, Tax exemption, tax filing, Tax Planning, Tax Preparation

5 Things that a COUPLE be mindful of when FILING TAXES?

The decision to marry someone usually revolves around love and compatibility. Finance is an aspect that we don’t know usually bring into the equation. However, Filing Taxes is an aspect that ought to get additional attention, since it comes with tax implications.

You can be a smart couple and save thousands of dollars in a financial year by taking a few key decisions related to taxes. Here are the top 5 things that you need to be mindful of when filing taxes.

Filing Status

Of the many decisions that a new couple has must take, the first one comes down to choosing between the following filing types:

  • Married filing jointly
  • Married filing separately

Needless to say, each type has its pros and cons. Let’s assess the benefits of filing jointly first.

  • On filing together, couples can enjoy lower tax rates since their income is combined and then the taxes are calculated.
  • It brings in a sense of responsibility as well since both the individuals must sign the filing.
  • You get access to a wider range of benefits as per the tax codes.

However, there are a few scenarios and conditions where you would want to file separately. Such as:

  • If a spouse is involved with business and the other partner does not want to be involved with the same.
  • In the event that a spouse is expecting refunds, filing separately will not jeopardize the refunds as well.

Possibly Lower Taxes

As already mentioned in the above, couples filing jointly can benefit from lower tax rates due to the combination of income. Couples with varying income levels can benefit from it. However, the benefits just do not end with lower taxes. You can opt for several tax credits as well. Here is a couple of them.

  • Lifetime learning credit
  • Adoption expense credit

If one spouse itemizes their tax filing, the tax code considers the standard deduction of the other spouse as $0. This ensures that the couple together itemizes and does not miss out on deductions.

Gift Taxes Exemption

Another advantage of filing for taxes jointly comes in the form of gift taxes exclusion or exemption. Here is how it works.

  • Currently, the annual federal exclusion for gift taxes is $14,000 per spouse.
  • If you are filing jointly, you can combine this exclusion.
  • You can use this clause to strategically move assets to loved ones or between both of you.

Cap LessMarital Deduction

This is one of the most understated benefits of filing taxes together as a couple. Though none of the couple’s plans for this, it is good to have feature. Surviving spouses have access to the unlimited marital deduction which allows them to transfer assets to their name. This might not seem that significant early on but gains a lot of momentum as the year’s pass.

Tax Credit

The child tax credit is one of the most alluring credit systems for married couples who want to file jointly. Here are the benefits.

  • The IRS allows couples to reduce their net taxable income by $1,000 for every qualifying child.
  • Factors such as relationship, age, dependent status, residence, citizenship and support decide whether your child is qualifying or not.
  • You can claim the benefits if your child is less than 17 years old, lives with you for more than half of the year and is related to you either by blood, adoption or marriage.

Given the fact that in 2015, 141.2 million taxpayers declared earnings to the tune of $10.14 trillion as adjusted gross income, resulting in taxes worth $1.45 trillion, it is essential that you are aware of the above.

5 Tax Benefits that you can claim when you take care of YOUR PARENTS & RELATIVES

5 Tax Benefits that you can claim when you take care of YOUR PARENTS & RELATIVES

by | Feb 28, 2019 | income tax, Tax benefits, Tax credits, Tax Planning, Tax Preparation

5 Tax Benefits that you can claim when you take care of YOUR PARENTS & RELATIVES? 

Tax Benefits ,A considerable amount of your money can get into medical related expenses when it comes to taking care of parents or relatives. Here are the five Tax Benefits

According to Caring.com, a company that specialized in Bankrate, about 40% of caregivers spend about $5,000 a year on caregiving. Similarly, about 25% of people spend more than $10,000 per year on caregiving.

Though it is not the primary concern paying for caregiving expenses can help you avail some tax benefits. One of the key points that you need to be aware of is that your elderly parents are declared as dependents.

Here are some of the benefits that you can claim if you take care of your dependent parents or relatives.

  • Medical Expenses

Having elderly parents can result in quite a considerable sum of money being spent on medical expenses. You have the option of claiming them as Itemized Deductions in Schedule A of your income tax.

  • Itemized Deduction comes in handy if you have exceeded the standard deduction limit.
  • The total medical related expenses must be more than 7.5% of your total adjusted gross income for a fiscal year.
  • The expenses include hospital care, visit(s) to doctors, cost of prescription drugs and so on.
  • January 2019 onwards, you will be able to claim only unreimbursed medical expenses if they exceed 10% of your adjusted gross income.

  • Income Simulation

The IRS has set a few criteria that your parents must meet before you can declare them as dependents on your tax returns. Here are some of them.

  • Your parents should not have an income that exceeds the exemption amount for the year in question.
  • The IRS decides the exemption amount and the value might change year on year.
  • In the event, your parent(s) have income from dividends or interests, a portion of their social security might also be taxable.
  • The IRS publication 501 consists of the exemptions for the current year.

  • Providing Support

If you provide support to your parents for at least half of the fiscal year, there are a few tax benefits that you can avail. The following are some factors that you need to consider before determining the support amount.

  • You would need to find out a fair market value for the room. If someone were to rent the room out, how much would they pay for it?
  • The next step would be to include expenses related to food. One needs to be careful and not include utility bills, medical bills or other general expenses that you incur.
  • The amount that you want to claim as support should exceed the income of your parent(s) by a minimum of $1.
  • A comparison between the income that they receive, social security or other income and the support that you lend will paint a clearer picture of support requirements.

  • Care Credit

Dependent care is a non-refundable tax credit that you can benefit from. In the event that your parent is a qualifying individual, you can claim for it. Here is all that you need to be aware of.

  • Parents who are physically or mentally unable to take care of themselves are qualified individuals.
  • You should have an income and certain work-related expenses to show, so as to qualify for the tax credit.
  • You should be able to identify your care provider properly.

  • Supporting Siblings

In the event that you support your parents along with siblings, you can claim the amount as well. The only condition being that each sibling must contribute to at least 10% of the total support expenses.

The above tax benefits will aid you in taking care of dependent parents or relatives.