COA 4131 1st Edition Lecture 4 Outline of Last Lecture I Taxes II Federal Income III Outlays IV Taxing Philosophies V Average Taxes VI Types of Taxes VII Tax Filing VIII Paying Taxes IX Common Forms X Paying Taxes XI Avoid Common Mistakes XII Withholding and Prompt Returns XIII Audits XIV Software XV Tax Preparation Outline of Current Lecture I Financial decisions and taxes II Use of Credit III Investment and Taxes IV Children s Investments and Taxes V Tax Deferred Retirement Plans VI Estate and Gift Tax Transfers VII No State Income Tax In VIII Sales Tax IX No Sales Tax in X Best Place s Cost of Living Calculator Current Lecture A Financial decisions and taxes a Owning a home i Property taxes are on the rise 1 Different prices by city and state 2 At the local level of government not the Fed b Job related i Includes moving and home offices 1 Can be tricky 2 Can deduct utilities water bill computers 3 Rules change ii Travel and entertainment spending 1 If a company was paying for a cruise have to have proof that you had to be there and were being productive for IRS B Use of Credit a Tax credits i Items such as child tax credits that reduce your tax liability 1 Both parents that are divorced cannot deduct kids only the one with sole custody can ii Hope Credit and Lifetime Learning Credit 1 Florida Bright Futures a FL put tax exempt money away 2 Each state has their own name for their scholarships and how they work for students C Investment and Taxes a Tax exempt investments i Tax free never will pay a tax on it ii Ex FL municipal bond b Tax deferred investments i Retirement plans IRAs Keoghs and 401Ks 1 401 Ks are for profit businesses a Employer and you put money in it tax free and then you have it when you retire and taxes start ii Tax deferred annuities 1 Put large amount in a lump and then each month you pull out so much 2 The longer you live the more you get out of it and the better deal you get 3 Original amount can be fixed or it can go up or down iii Series EE U S Treasury Bonds c Capital Gains i Refers to profits from the sale of capital assets such as real estate stocks or bonds ii Capital is another word for money iii Buy a house and rent it out to others iv Opposite is Capital Loss 1 Sell it at its loss 2 Reduces you taxes a Can balance things out b Not necessarily a bad thing D Children s Investments and Taxes a Custodial account E F G H I J i One parent serves as custodian for the child act under the Uniform Gifts to Minors Act 1 10 13 000 for each child and not have taxes on them Tax Deferred Retirement Plans a 401 K i Trying to move everyone to these b IRAs i Deduct contributions 1 Limited to the government ii Annual contribution of 4 000 per couple 1 Amount can change over time Estate and Gift Tax Transfers a If a person died in 2000 he or she could have left up to 675 000 to beneficiaries federal tax free i Right now its over 1 million ii It changes Congress fights over amount iii State tax depends on state No state income tax in a Alaska b Washington c Wyoming d South Dakota Sales Tax a In more states it ranges from 4 7 b Florida is 6 No Sales Tax in a Alaska b Delaware c Montana d Oregon e New Hampshire Best Place s Cost of Living Calculator a Average is 100 i Austin TX is 102 b Housing cost i Largest defining factor in cost of living
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