Category: Tax Tips

For years, obesity has been a problem in America, and that problem continues to grow. According to records, 35% of Americans are obese. The Centers for Disease Control and Prevention even calls the problem of obesity a national epidemic. It is not just a problem about weight; it is a serious problem with health. One of the major reasons for obesity is sugar—sugary food and sugary drinks.

As obesity becomes a national concern, some areas in the United States have chosen to tax sodas or sugary drinks. It is like hitting two birds with one stone: the local government earn from sugary drinks, and people are now more conscious about buying these drinks. This surcharge is called a sugary drink tax or soda tax. The main goal of the tax is to reduce intake of drinks with added sugar among constituents. These include carbonated soft drinks, energy drinks and sports drinks.  

Soda tax, though, is still highly debated. Of course, large softdrink companies Coca-Cola and Pepsi are against such tax imposition. But they are smart and are great marketing players. Why else would they sell sugary drinks that have no sugar? That’s a marketing ploy and a wise strategy that beat this so-called soda tax. These companies are also rich enough to fight imposition of the soda tax so that no state in the United States has actually passed this sugary drink tax. They have started campaign strategies in some states where the sugary tax law was supposed to be tackled and voted on.  

 

What are the cities in the United States with soda tax?

Since cities and counties have their own sets of laws, six local governments actually have soda taxes paid for by distributors of the sugary drinks. The local governments are the following: 

Albany, California 

The state of California has the most cities with soda tax, Albany being one of them. The tax imposition was approved by voters during the 2016 General Election for a Sugar-Sweetened Beverage General Tax. The tax calculation is one cent per ounce of sugar-sweetened beverage.  

Albany actually has the highest approval rating for the regulation as 71% of voters voted for it. That year 2016 was very important for the sugary drink industry as four cities were voting on the soda tax. Both sides of the soda tax debate spent so much to campaign for or against the tax imposition. It was even known as the most expensive city-level issue voting in the history of America. In a Vox report, it was learned that the anti-soda tax group spent over $36 million in a bid to influence voters against voting for the tax measure. Of this amount, over $30 million was spent by the American Beverage Association, while around $4.7 million was spent by Coca-Cola and another $2.1 million by Pepsi. On the other hand, only close to $12 million was spent by the other side. Former New York City mayor and one of the richest men in America, Michael Bloomberg, spent around $9.1 million in the fight to pass the soda tax in 2016. The Laura and John Arnold Foundation spent $2.5 million for the same fight, while the American Heart Association spent $300,000. Despite the disparity in monetary spending in favor of the side against the passing of the soda tax, the residents of Albany chose to vote for the surcharge anyway.  

Berkeley, California 

The city is the earliest local government to pass a soda tax known as the Sugar-Sweetened Beverage Product Tax in 2014. Products included in the surcharge imposition are sodas, energy drinks and heavily pre-sweetened teas. Also included in the tax are the added caloric sweeteners like syrup that is used in fountain drinks. The same with Albany, the tax was a cent for every ounce of the sugar-sweetened drink. According to a report, the additional tax in Berkeley reduced sugary drink consumption in the area by 20%.  

Oakland, California 

Also passed in November 2016, the Sugar-Sweetened Beverage Distribution Tax or the Oakland Soda Tax was supported by 61% of voters. It provides that every fluid ounce of soda, energy drink, sweetened tea, juice and even sweetened water will be taxed by a cent. The goal of the tax is to promote public health and to fund community development programs. However, in the case of Oakland, the tax goes to the general fund, which can be used for any government programs. However, the city is still required to fund health promotions and community programs even if it is not clear that the funds specifically came from the soda tax.  

The city also formed the Soda Tax Advisory Board, which is tasked at recommending programs that will prevent health problems following the consumption of sugary drinks.  

San Francisco, California 

Also passed during the hype of the soda tax in November 2016 is the Sugary Drinks Tax of San Francisco. But it wasn’t until 2018 that the tax was implemented for transfer sugar-sweetened beverages and syrups or powders. The rate is one cent per fluid ounce of the sugary drink. 

Over 61% of the voters supported the tax, but it wasn’t the first time that this went into referendum. In 2014, majority of the voters supported the soda tax in San Francisco, however, the referendum required two-thirds votes. The tax rate is one cent per fluid ounce of the sugary drink, just like most of the other cities.  

Boulder, Colorado 

The Sugar-Sweetened Beverage Product Distribution Tax in Boulder was passed during that heated year of 2016. The tax imposed in the city for sugar drinks is the most expensive at two cents per ounce of the beverage and those with sweeteners. Tax revenue is used for the promotion of health and general wellness of the population. The tax also aims to prevent chronic diseases caused by sugar or due to obesity.  

Philadelphia, Pennsylvania 

Known as the Philadelphia Beverage Tax or Philly Bev Tax, the law imposes tax on “any form of caloric sugar-based sweetener, including but not limited to sucrose, glucose, and high-fructose corn syrup. Caloric sweeteners also include sugars from concentrated fruit or vegetable juices that are in excess of what would be expected from the same volume of 100% fruit or vegetable juice of the same type.” So these include energy drinks, non-alcoholic cocktail mixes, pre-sweetened coffees and teas, sports drinks and sweetened water. 

Revenue from the soda tax in the city will be used to fund pre-kindergarten and community schools, parks and recreation centers, libraries and other projects that will benefit the public especially those in the lower-income category. The goal is for these programs to aid in the fight against poverty and criminality, which will also result in the improvement of the economy. 

The tax is at 1.5 cent per ounce of sweetened beverage. 

Seattle, Washington 

Also starting in 2018, the Sweetened Beverage Tax in the city of Seattle became a law. The tax was passed by the Seattle City Council with a vote of 7-1. During the first four months of the implementation of the tax regulation, it was reported that Seattle earned $4 million from the soda tax alone.  

In these six cities, the sugary drink tax is collected from the distributors. This means that consumers don’t need to pay additional sales tax to the drink when purchased.  

Other areas tried to follow suit when it comes to passing legislations on the imposition of surcharge on sugary drinks. Cook County, Illinois actually succeeded in passing a similar legislation in November 2016 requiring sugary drink distributors to pay tax of one cent per ounce of sweetened drink. Less than a year later, the tax law was repealed. 

Arizona and Michigan, as a state, preempted the passing of any local government sugary drink tax. California also has a similar preemptive legislation that banned local governments from establishing a new tax for 12 years starting in 2018. The four cities with the soda tax are no longer covered.  

 

Why only a few cities passed a sugary drink tax 

It seems like a soda tax is very noble: it stops people from consuming more sugary drinks and the tax is usually spent on health or development programs. But it is quite disconcerting that only six local governments actually passed a soda tax. Some say that having a sugary drink tax is regressive because it is the lower-income people who are hit the hardest. While the soda tax is collected from distributors, it is highly likely that distributors will increase their prices in order to accommodate the tax. It’s a business and companies would always pass the tax to consumers no matter how indirect it is. The slight increase in the price of sugary drink may not have a large impact on wealthier individuals, but for people in the lower-income bracket, the effect is quite significant. 

Also, those who lobby against the soda tax will argue that sugary drinks are not the only reason for obesity. They have a point. Unhealthy eating habits coupled with a sedentary lifestyle are major reasons for the obesity problem in America.  

Obesity, though, is a worldwide problem, which is why the soda tax is not something unique to the United States. However, unlike in other countries, the soda tax is actually national legislation. According to reports, Denmark was the first country to legislate the soda tax. Surprisingly, the country did so as early as in the 1930s. Other European countries passed similar laws after 2010: Finland and Hungary in 2011, France in 2012, Mexico in 2013 and United Kingdom in 2016. 

People have treated the soda tax as similar to the tobacco tax. The two have parallelisms with soda tax aimed at reducing obesity and diabetes, and the tobacco tax at cancer. The rationale is that sugary drinks and cigarettes are not necessary for one’s survival, therefore, it is not a grave federal sin if these items are taxed.  

Plausible in the national level 

If other countries are doing it, then the United States can also do it. According to non-profit organization Urban Institute, sugar tax in the national level is feasible. However, it advises doing so by sugar content rather than by volume. It states that the National Government already taxes alcoholic drinks according to its alcohol content.  

“As systems are developed, the formats of early-adopted drink taxes are likely to influence the development of these taxes throughout the United States,” the Urban Institute researchers said. “Local governments should consider their policy goals as they develop these taxes. If policymakers are proposing taxes on sweetened beverages to discourage sugar consumption, they should give close consideration to basing those taxes on sugar content, which is feasible and legal in many jurisdictions. If, however, their primary goal is revenue collection, taxes on drink volume or sales value might be preferred because of their efficiency.” 

The danger of taxing sugary drinks by volume is that it discounts sugar content, which was the essence of the tax in the first place. The goal is to lessen sugar consumption, not liquid consumption. That is also what most countries aside from the United States is doing: taxing sugar content. It is also quite easy to measure as sugar content is required to be placed in the nutritional level.  

Should the government now start taxing all other unhealthy food? 

It would seem like a very hard battle to win if health buffs will now try to target all unhealthy food and force government to enforce new taxes in order to limit the consumption of junk food. But if the soda tax could not gain support from a single state, an unhealthy food tax will unlikely find a champion. Consumption of unhealthy food is directly linked to diseases like obesity, diabetes and hypertension. It’s a good thing that navigating what is unhealthy may be more complex than identifying sugar. This would be a long and unhealthy discussion that would lead to an even more unhealthy discussion when complemented with the tax issue. 

But what this sugary drink tax brings to the table aside from the surcharge is a discussion. People are actually talking about it, which eventually leads to discussion on why the tax came about. The real advantage of the sugary drink tax is that people are actually talking about the ills of sugar in one’s health and that it potentially causes diabetes and obesity. Perhaps, without the need of passing a soda tax, some people will stop or at least reduce sugary drink consumption for health reasons.  

The 2019 tax season for the filing of 2018 tax returns is over, but it is never too early to start thinking or preparing your 2019 tax return. In fact, it may be the best time to start thinking about next year’s tax obligations so that you don’t need to fuss when the 2020 tax season comes.  

According to the Internal Revenue Service (IRS), 103,460,000 American citizens filed their tax returns during the April 15 deadline. The number was down from 103,762,000 tax filers in 2018. About 77,925,000 tax returns were processed for tax refunds this year compared to 79,100,000 last year. The total amount of tax refund processed this year was $220,762,000,000, which is 2.6% lower than the refund last year amounting to $226,558,000,000. The average refund this year was $2,833 compared to last year’s $2,864 average refund.  

This year also marks the first time that taxpayers filed their taxes under the Tax Cuts and Jobs Act, which amended the Internal Revenue Code of 1986. The basic aim of the law is lowering tax rates and adjusting tax brackets so that those who earn a lower income will be taxed lower than in the past years. But personal exemptions have been eliminated. Family tax credits were also increased while itemized deductions were reduced.  

Now that you have an idea what the new tax law entails, you would have a better idea on how to file your 2019 tax returns. This means that you have to employ new strategies on how to lower your tax rate—legally of course.  

How was the Tax Cuts and Jobs Act? 

The verdict on the Tax Cuts and Jobs Act is still out. But people are somehow looking at it on the basis of tax refund. The higher the tax refund, the better it is, so some would surmise. Going by that basis, then surely the tax amendment wasn’t that good considering that the average tax refund was down by around 1.1%. 

But that is not actually a logical basis considering that everything was lower this year: from the number of tax returns filed to the total amount of tax return filed. The difference in the number of tax returns filed could have resulted in also increasing the average tax return. There are many considerations that need to be factored in before one can really say that this amended tax law is better or worse than the original.  

According to a report, only 13 states experienced a lower tax refund this year. The rest of the 37 states experienced a higher tax refund with the Dakotas getting the highest refunds at 6.7% for North Dakota and 6.5% for South Dakota. The District of Columbia experienced a lower tax refund by 6.1%. 

Preparing your 2019 tax return 

Since you already have your 2018 tax return, you might as well dig up your 2017 tax return, which could be handy while you prepare for your 2019 tax documentation. Compare your last two tax returns, particularly the total tax you paid. That will at least give you an idea on how much you should prepare for your 2019 tax.  

Another important information you need to determine is the tax liability. If your latest tax liability went down, it’s not automatically a good thing. Perhaps you didn’t withhold enough for your tax? You have to figure this thing out or there is a possibility that you would owe more in 2019. You might not be eligible for a refund if that happens.  

Are you getting a salary increase this year? Or do you have a side hustle that provides you with extra income? Then you should adjust your withholding tax so that you won’t be surprised next year by the time you fill out your tax return.  

It also helps if you can figure out the huge difference in your tax liability during those two years. Generally, tax liability is lower as the citizens enjoyed the benefit of the Tax Cuts and Jobs Act—that is if you measure it by states. New Jersey experienced the biggest drop with 29.1%, followed by Massachusetts with a drop of 27.6% and California with 27.1%.  However, these reductions in tax liability are not felt by every household because of the different tax implications for each taxpayer. 

A couple without children may be taxed higher than those without children especially if they live in a state without alternative minimum tax but has a high state and local taxes. One of the reasons for this tax imbalance is the cap on state and local income tax deduction at $10,000. This means that citizens with high property and income will pay more taxes because they can’t deduct much of their liability in their federal income tax returns. Those with children pay lower taxes because there are tax credits for parents with minor children. There is a $2,000-per-child tax credit for children under 17 years old. This tax credit is more than double the credit from the previous law.  

Ways to Prepare for 2019 tax return:

 

Prepare your tax return in advance 

Have a chat with your accountant or bookkeeper and collaborate on a plan to make your 2019 tax due more bearable. If your 2018 tax liability was quite high, then there must be something you can do about it to make your 2019 tax obligation lower. With around 10 months before tax season is here again, you actually have a lot of time to draw up a strategy to make your tax liability better. And if your 2018 tax liability is low enough, surely making it lower is only more beneficial. 

Monitor your withholding tax 

You can adjust your tax withholding every year, which is why you should check how much you are actually withholding from your salary every year. The Tax Cuts and Jobs Act prompted the IRS and the Treasury to adjust the tax withholding tables, which affected income taxes withheld from salaries. This is also a reason why tax refund is generally lower this year.  

As early as January this year, taxpayers have complained over social media how they are getting lower tax refund than in previous years, while some are saying that they now owe the IRS some money. There were deductions that were scrapped under the Tax Cuts and Jobs Act, which should have been a go-signal for a taxpayer to increase their withholding tax. However, as it is still a new law, people were not as attentive to the changes.  

Check out tax-friendly opportunities 

With more than half a year to go before the next tax season, you have a real opportunity to examine tax-friendly initiatives at work. There are a couple of options like your retirement fund or the 4019(k) contribution and health savings account. Both will lower your taxable income. It is actually like hitting two birds with one stone because while your taxable income is lowered, your fund for the future is being sealed, as well as your health savings account—make that hitting three birds with one stone. 

There is also that dependent care flexible account that will help you set aside $5,000 as a means to care for children under the age of 13. The amount will be on a pre-tax basis.  

Be charitable 

The amount you donate to charity will not be taxable, so it is best to plan out your donations to charitable institutions in advance. If you could spread out the donation within a year so it won’t be too heavy, then that would be great. Again, it is like hitting two birds with one stone: you get to reduce your tax due, and you get to help a charitable institution of your choice. Make sure the organization you are trying to help is legitimate, or else what’s the point? 

Ask your accountant about the process of “bunching” in order to save more on your tax due. This is the process wherein a couple or more years of charitable contributions are bunched together in order for you to get a better tax deal. This way, you can itemize deductions every other year and save in bulk every other year.  

Hire a tax preparer over using a tax software

So there are a number of tax software that can help you with your taxes come tax season. The advantage of tax software is that you only have to pay for it once and you can use it for a long time. As opposed to having an accountant as a retainer, this will help you save some money. Of course, during tax season, an accountant is still extremely helpful. But the tax software can be your expert during the 10 months or so of the off-tax season.  

The greatest advantage of having a tax software is that your life will become easier during tax season. Usually, a tax return can be completed within days. But with tax software, the process is cut by a lot. It also helps that since you have the software months before tax season, you can input variables into the system as you get them. For example, when you donate to charity today, you can input the amount in the software and it will become part of the equation during tax season. There will be lesser chances of you forgetting a piece of information that will make a huge difference when it comes to calculating your tax liability. 

Since you have time, it might be a great idea to test out a number of software before actually buying them. Most kinds of software have a free trial so you might as well take advantage of that. The IRS also has its own software called the Free File Software for those whose income is below $66,000 in a year. According to reports, about 70% of the American population is eligible for free filing.

However, hiring a tax preparer is a lot better than using tax software.   Click here to know why…

Know the common tax filing mistakes 

One advantage of preparing your tax return early is the chance to correct mistakes. One way to do that is to learn the most common filing mistakes that citizens commit while preparing their tax return. Here are some of them. 

1. Wrong Social Security numbers. This number is your identity, you should know it like you know your name. But sometimes, because you are in a hurry or you are so confident that you already memorized the number, you don’t notice that you put in the wrong number or you interchanged a couple of numbers in the series. According to the IRS, this is the most common mistakes committed by tax filers. So double or triple check the Social Security number you put in your tax return. 
2. Wrong name. This sometimes happens with couples. There is some confusion on what name will appear on the tax return when the couple is either filing separately or jointly. This is why it really helps when you file early. 
3. Multiple filing statuses. This usually just happens with paper filing, seldom with online filing.  
4. Forgetting to sign the tax return. 
5. Calculation errors. This could happen whether we make our own calculations or whether we use an online software to do the math. The thing with the software is that it is still dependent on the numbers that humans input into the system. Once a number is wrong, the entire equation will suffer. Without the software, the taxpayer could make a mistake in both recording and calculation.  
6. Wrong account number. If you put in the wrong account number in your tax return, chances are your tax refund will be delayed. It is actually very easy to prevent, and with time on your side, this mistake should really be avoided. 
7. Claiming ineligible dependents. You might write down dependents who have already lost their dependency status. Such mistake could have dire consequences for your tax situation as it may be taken as fraud. 
8. Failure to file a tax return on time or the failure to ask for an extension to file a tax return.  

 

When looking for a property, one of the things that one needs to consider is the property tax. Every state has a different set of property tax regulations and you might want to look into that before deciding to buy a home. But having the highest property tax doesn’t always mean a bad thing, just as a cheap property tax doesn’t necessarily mean great for you. A property tax is imposed by the local governments, usually as their main source of income.  

Since it is the main source of revenue for a city or county, most areas with higher property tax almost always have better community benefits like a nice park or better infrastructure like roads and bridges and all other government-initiated projects that will benefit the local citizenry. This is why having a high property tax doesn’t always mean a bad thing for a homeowner as it might just mean better education for children and safety and security. Still, it doesn’t always follow that having a low property tax would mean a chaotic neighborhood and garbage-laden streets. So if you are looking for a property, you have to do your own research about property taxes as well as the community. You should definitely visit the community before committing to such a large financial investment. 

Neighbors could have different property taxes 

This is not a common example but it still happens. A subdivision that lies between two cities would mean different property taxes for families who live across each other. Their houses may be almost uniform but because of a city boundary, their taxes are different. Even more uncanny is that there is a possibility that these families will share public resources because they belong to the same county. So they could have the same park and their children could go to the same school being from the same school district.  

Again, the differences lie in what the two cities have to offer. The city with the higher property tax might have a booming business district. Also, a city zoned as a residential area will have a much lower tax rate. Don’t let property rates fool you though. You might think that an area with a high property rate will have more expensive houses. Nope. That is not always the case. As USA Today pointed out in a comparison between the states of California and Ohio: the property tax rate of the former is in the bottom half of the country, ranking 34th in the list of the lowest property tax rate at 0.81%. On the other hand, Ohio has the 12th highest property tax rate in the country at 1.56%. However, a median house in Ohio could cost $129,900 and the property tax will be around $2,032. In California, for a similar house, the property is valued at $385,500 with a property tax of $3,104. 

Preference 

But does that mean you would want to live in Ohio than in California? Just because Ohio has a lower property tax rate doesn’t mean that you would choose that over living in California. This is all a matter of preference and practicality. California is the most populous state and for good reason. There are so many opportunities in California. Its economy is the largest in America, and the fifth largest in the world. It is considered a trendsetter in pop culture and films for obvious reason: Hollywood. California is also a leader when it comes to environmental issues, politics, food and culture, and technological innovation—it is where Silicon Valley is located after all. Its economy is also diverse, which is presumably because it is also a melting pot of culture. The state is large and versatile, but that is what all people want. Some want a more peaceful and less densely populated area. 

Ohio’s economic reputation is not bad at all. It consistently ranks high among states with the best business activities. The state is known for being business-friendly, which means that industries prosper and people are at work. That is good for the people trying to settle down, of course, as it could mean that work is abundant. Population growth in Ohio is slow so it is not as populated as other states. Some people would prefer this, hence, may want to live in Ohio more than California.  

Other considerations 

When considering settling down in a place, it’s not just a property tax that you have to consider when it comes to buying real estate or even building a commercial establishment. A city may have lower property taxes than usual but there are also other types of taxes attached to buying a property. According to reports, Bridgeport in Connecticut has the highest property tax rate in the country. However, if you live there, there are no sales taxes included in your shopping items. There are also no income taxes. However, Birmingham in Alabama has a slew of other taxes despite having the 11th lowest property tax in the country. So while the tax on your property will be low, living there will not necessarily be cheaper.  

According to the USA Today report, what is considered as just the right amount of property tax rate for homeowners is 1.2%. On the national average median home cost of $178,600, the property tax would amount to $2,149 for a year. There are 18 states that have higher than the 1.2% rate while the rest of the 32 states have lower rates.  

Top 10 states with the worst property taxes

Here’s the list according to the Lincoln Institute of Land Policy.

New Jersey 

Not only is the Garden State among the more expensive states to live in, but it also has the worst property tax among the country’s 50 states. This has to do with the bustle in this small state. It is the fourth smallest state in America but it is the 11th most populous. Being small and having a large population makes New Jersey the most densely populated state in the country. The median home value is $315,900. That is 43% more than the national average. The property tax rate is pegged at 2.35%, which means that if you own a home in New Jersey that is around $315,900, you are going to pay around $7,410 in property taxes in a year. But this actually makes sense considering that New Jersey is also the second wealthiest US state in the country. Its constituents can afford expensive homes. Nine New Jersey counties are in the top 100 wealthiest counties in America.  

Of course, there is a payoff for that exorbitant property tax. In 2015, the state ranks fourth among states that spent the most on every public school student. This means that New Jersey’s budget for public education is high. New Jersey school systems consistently rank high among the top school systems by state. Over the years, New Jersey high schools also made it to the top 25 best American high schools.  

Illinois 

The Land of Lincoln is not far behind New Jersey when it comes to tax rates, however, the median home value is so much lower. While the tax rate is at 2.3%, the median home value in Illinois is just $173,800. That means that the median property tax paid is close to $4,000 a year. Illinois is often referred to as a mini United States. This is because Illinois has almost everything: from industrial cities to agricultural areas, transportation hub, an international airport to bodies of water that link to other states. There are also diverse energy industries, manufacturing and service companies and varied investment opportunities. It is a surprise then that the unemployment rate of the state is at 4.2% when there are so many activities in the area. The area also has among the highest minimum wage in the country.  

New Hampshire 

With a median home value pegged at $237,300, the tax rate of the Granite State is among the highest at 2.15%. But while the property tax is higher than the national rate, the state doesn’t impose a sales tax and personal income is not taxed as well. And while it is the fifth smallest state in terms of land area, it is also the 10th least populous of the 50 American states. It is also a very white state: 93.9% of the population is white.  

Connecticut 

Another generally white state also has a high property tax. Connecticut’s white population make up 77.6%. The property tax rate is at 1.97%. The state’s median home value is also more expensive than the national average at $270,500, which means an annual tax of $5,327. When you know the average income of the state’s population, you would also understand why real estate is much more expensive than in other states. According to a report, Connecticut has the highest per-capita income and median household income among all states in the country. But it is also densely population. Even if it is the 29th most populous state, it is also the third smallest state in terms of land area.  

Wisconsin 

Property tax rate: 1.96% 

Median home value: $165,800 

Texas 

Property tax rate: 1.9% 

Median home value: $136,000 

Nebraska 

Property tax rate: 1.85% 

Median home value: $133,200 

Michigan 

Property tax rate: 1.78% 

Median home value: $122,400 

Vermont 

Property tax rate: 1.74% 

Median home value: $217,500 

Rhode Island 

Property tax rate: 1.63% 

Median home value: $238,000 

Meanwhile, the following states are the

 

Top 10 Best States for property taxes

These are generally so much lower than the national average of 1.2%. 

Hawaii 

This state is very popular among domestic and international tourists, which could be the reason why it is not dependent wholly dependent on its property taxes. The property tax in the state is just 0.27%. However, because it is a tourist destination, most of its lands are considered prime real estate. Median home value is at $515,300. It is the highest among all states. Despite the expensive real estate, median tax amount is only around $1,406 because of the low property tax rate. The general cost of living in Hawaii is very expensive.  

Alabama 

 

When it comes to actual tax amount, Alabama has the cheapest based on recorded median tax payments. The property tax rate is 0.43% but the median home value is way lower than that of Hawaii. The median home value is only $125,500, which means that median tax amount is only $543. Alabama, though, has among the highest poverty rates in the country—the sixth among 50 states. It also follows the federal minimum wage of $7.25 per hour instead of having a state minimum wage, which is higher than the national mandate. So while it is cheap to live in Alabama, opportunities are also scarce. Unemployment rate is even higher than the national average.  

Louisiana 

The state is somewhere in the middle when it comes to economy, but its per capita personal income is one of the lowest, ranking 41st out of 50 states. But it is also considered among the most small-business-friendly states in America. It is quite cheap to live in Louisiana with the median home value pegged at just $144,100. The property tax rate is 0.49%, which means median property tax amount is at $707.  

Delaware 

Based on Alabama and Louisiana, it would seem that the lower the property tax rate, the poorer the state. That is not the case with Delaware, which imposes a property tax rate of just 0.54%. The state has among the richest residents in America. According to a study, Delaware is in the top 10 states with the largest number of millionaires based on per capita. This is also the reason why real estate in the state is a bit expensive with the median home value pegged at $231,500. But there is really no reason why property tax rate should be high when the state’s buzzing economic activities: more than 50% of the country’s publicly traded companies are located in Delaware. Also, over 60% of Fortune 500 companies are incorporated in Delaware. This is due to the state’s business-friendly corporation laws.  

Washington DC 

Property tax rate: 0.56% 

Median home value: $475,800 

South Carolina 

Property tax rate: 0.57% 

Median home value: $139,900 

West Virginia 

Property tax rate: 0.58% 

Median home value: $103,800 

Colorado 

Property tax rate: 0.6% 

Median home value: $247,800 

Wyoming 

Property tax rate: 0.61% 

Median home value: $194,800 

Arkansas 

Property tax rate: 0.62% 

Median home value: $111,400 

 

Businesses are not the only ones that need a tax preparer. An individual can file a tax return by himself if he wishes to. He might think he can save money doing the tax return himself rather than hiring a tax preparer to do so, but this is not always true. S

Why do I need a tax preparer? Why is hiring one more practical for a taxpayer?

These are some of the reasons why you need the help of tax preparers

Expertise 

A tax preparer knows taxes like the back of his hand. He certainly knows it better than you—unless, of course, you are a tax preparer yourself or a certified public accountant. Having a tax preparer is even more important this year than any other year. Why? Because this is the first year that changes under the Tax Cuts and Jobs Act will be implemented. The Tax Cuts and Jobs Act, which was passed in December 2017, amended the Internal Revenue Code of 1986. There are many changes under the new law that could make filing tax returns more complicated for a layperson, especially after filing it under the old tax law for years. 

Some changes under the Tax Cuts and Jobs Act 

• Tax reduction for individuals and businesses. 
• Increase in standard deductions and family tax credits. 
• Elimination of personal exemptions. 
• Limiting deductions for state and local income taxes. Limiting mortgage interest deductions. 

• Reduction of alternative minimum tax for individuals. 
• Eliminating alternative minimum tax for corporations. 
• Reduction of number of estates that will be considered under the estate tax. 
• Repealing individual mandate of the Affordable Care Act.  

 

Savings 

Hiring a tax preparer could actually save you some money. The cost of one is between $100 and $300. You might think that this would be a bit steep considering that you could do your tax return on your own. First of all, the tax preparer would have to pour over dozens or hundreds of documents and receipts to do your tax return. Secondly, numbers are tricky, so the amount is quite appropriate for a professional with an expertise that is not very common. But why should you pay that much for a tax preparer when you could do it on your own? Because as mentioned above, filing the 2018 tax return is more confusing than ever. But tax preparers know the law and studied the new law meticulously. They could identify tax credits and deductions more easily than a lay person. Because of the tax amendment, there will be deductions and tax credits that will not be obvious to a taxpayer. So there is a big possibility that your $150 tax preparer could actually give you a tax refund worth $500 or more and shave your tax due by more than his professional fee.  

Technical help in the event of an audit 

According to reports, only one percent of taxpayers who have an income of less than $200,000 a year were audited last year. This is quite the same trend over the years. Low- to middle-income earners are not at risk of being audited—at least the probability is not high. However, in case you will be part of the unlucky one percent that gets audited, it would help that you have an expert with you who can handle the audit. If you get audited, that means you will have to face a member of the IRS by yourself. The IRS agent will be armed with the proper tax law knowledge, while you only have your knowledge of your tax return to depend on. Having a tax preparer by your side means somebody could go toe to toe with the IRS when it comes to the provisions of the tax law.  

Avoid errors 

Having an expert doing your tax return means few to zero mistakes. You may have been doing your tax returns by yourself for years but no one is immune to mistakes. That is not to say that experts won’t commit mistakes, but since they have been doing this more frequently than you, then mistakes are expected to be few and none at all—mostly betting on none considering that they are paid to do this. It will not be good for their credibility if mistakes are made in their client’s tax return. Also, some of them use software to double check inputs in the tax return. But you could argue that why not just buy a software to do the tax return? That works, too. In fact, there are online programs that could do the tax return for you. Again, this will go back to expertise. The tax preparer knows best how to use the program or software and he knows best what to input in it. Choosing a computer program over a tax preparer might be more expensive in the end since you have to pay for the system and you won’t get to maximize its benefits anyway as you might just end up needing a tax preparer to organize your data.  

Convenience 

You might have to spend hours going over documents and receipts in order to file your tax return. These hours could have been more productive working—that could earn you money. Or these hours could be spent relaxing—that could give you peace of mind and even save you some future health problems. Taxes are usually causing stress among many Americans. There is always that fear of being audited and not filing the proper tax return. Hiring an expert to deal with all those could be the best thing for your sanity. 

In the end, you have to do what is best for you. If you are confident that you could do this on your own and just want to save the hundred dollars or two that would be spent on a professional, that is really up to you. But the reasons above might just make paying the professional fee worth it.  

As the Internal Revenue Service (IRS) processes millions of tax returns, the millions of taxpayers also eagerly await their tax refund. Since it’s tax season, tax is the hottest topic around. Unfortunately, just like any popular conversations, not everything you hear will be the truth. So here are some tax refund myths that you are bound to hear. 

Everybody gets a tax refund 

It’s funny that whenever people scramble to file their tax return in order to get a tax refund, other people scramble as well, even if they didn’t actually deserve a tax refund. Many people actually expect a tax refund. The tax refund is basically just a tax rebate when taxpayers pay more than their liability. It is not a benefit from the IRS. It is basically just your own money, some kind of over payment to the government. People obviously want it because it’s kind of a windfall since it is usually a large sum of money. In fact, when you look at it logically, having a refund should not sound as attractive as it usually does because this is money that had gotten stagnant in the hands of the IRS. If you had this kind of money and invested it, then perhaps you would have more in your hands. Instead, the money was with the government and given back to you after a year or so without any interest. But if there is a delay in your tax payment, rest assured that you will be penalized by the IRS and you will also be liable to pay interest.  

So what could be the reason you are not getting a tax refund? First of all, you have to file a tax return in order to get a tax refund. If you filed for an extension to file tax return, then that means the IRS cannot process your actual tax due just yet. As a result, your refund may be delayed—so this is not an absolute negative on the tax refund front. You are also not liable for a tax refund if the amount withheld from your paycheck is just right. Again, note that not getting a tax refund is not exactly a bad thing. In other cases, you might have earned a substantial amount from the Individual Retirement Account (IRA), which has offset your tax refund. The IRA has an investment component, which is why a taxpayer could earn from it. You know that the IRS will tax every earning you have and that IRA extra income will not get immunity.  

Calling the IRS / tax professional will hasten the release of tax refund 

If you think calling the IRS will make your tax refund come any faster, then you’re in for a heartbreak. This is such a load of myth because calling the IRS would only mean being placed on hold for a very long time. The IRS has so many things to do and probably many other taxpayers to entertain on the phone, some probably having the same thoughts as you. The same for the tax professionals, calling them will not make your refund arrive any faster.  

There is a tool, though, where you don’t actually have to irritate any person to know how long before you can have your refund. Keeping up with the times, the IRS has its own app: IRS2Go. There is where you can check your refund status and make payments as well. You only need your Social Security number, filing status and amount of expected refund. If the tax return was filed electronically, then the status of your refund will be available within 24 hours. If you filed via regular mail, the status will not be available until after at least a month.  

There is also a tool on IRS.gov called Where’s My Refund? You can just click the tool and input your personal data in order to check your status.  

Where’s My Refund? Tool doesn’t work—it doesn’t show a deposit date for the refund 

Just because it doesn’t give you what you want doesn’t mean it’s not working. Most people question how Where’s My Refund? works because of varied experiences with other people. Say you checked Where’s My Refund? on the same day a friend of yours or colleague did, it doesn’t mean that your tax refund will be released or arrive at your doorstep on the same day your friend or colleague received theirs. The IRS doesn’t process every tax return the same way. This makes sense since one tax return varies from the other.  

Where’s My Refund? tool is wrong!  

This usually happens when one receives a tax refund that’s smaller than expected. Computation is not always perfect, so the difference in the expected tax refund and the amount actually received could simply be attributed to math mistakes. The discrepancy may also be caused by delinquent federal taxes. Sometimes, the IRS withholds a certain amount unless it has completed a review on an item claimed on the tax return.  

Don’t worry though, the IRS will be sending a letter of explanation on why the actual refund is different from what was expected.  

Acquiring a tax transcript will give you a tax refund date 

So some internet influencers call this a tax refund hack of sorts: ask for a tax transcript from the IRS and, in turn, you will get the date of when to expect a tax refund. This is not true at all. A tax transcript will only indicate past income, tax filing status for mortgage, student loan application and small business loan application. Nowhere in the transcript does it indicate when you will be getting a tax refund. Many have called this a “secret way” but it is never the case.  

I got a refund! There is no need to review withholding tax 

Withholding tax should be checked every year and should be adjusted annually as well if necessary. Just because you got a refund doesn’t mean that your withholding should remain the same. It is always better to be safe than sorry, so make sure you will be deducted the right amount of tax this year.  

Taxes are boring stuff and people don’t always take time to get to know them. But there is power in knowledge. The more you know about taxes, the more you are empowered. This truly helps when dealing with the IRS and taxes in general. The first part of learning about taxes is separating the truth from the myth.