COA 4131 1st Edition Lecture 4 Outline of Last Lecture I. TaxesII. Federal IncomeIII. OutlaysIV. Taxing Philosophies V. Average TaxesVI. Types of TaxesVII. Tax FilingVIII. Paying TaxesIX. Common FormsX. Paying TaxesXI. Avoid Common MistakesXII. Withholding and Prompt ReturnsXIII. AuditsXIV. SoftwareXV. Tax Preparation Outline of Current Lecture I. Financial decisions and taxesII. Use of CreditIII. Investment and TaxesIV. Children’s Investments and TaxesV. Tax Deferred Retirement PlansVI. Estate and Gift Tax TransfersVII. No State Income Tax InVIII. Sales TaxIX. No Sales Tax inX. Best Place’s Cost of Living CalculatorCurrent LectureA. Financial decisions and taxesa. Owning a homei. Property taxes are on the rise1. Different prices by city and state2. At the local level of government, not the Fedb. Job relatedi. Includes moving and home offices1. Can be tricky2. Can deduct utilities, water bill, computers3. Rules changeii. Travel and entertainment spending1. 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 Credita. Tax creditsi. Items such as child tax credits that reduce your tax liability1. Both parents that are divorced cannot deduct kids, only the one with sole custody canii. Hope Credit and Lifetime Learning Credit1. Florida Bright Futuresa. FL put tax exempt money away 2. Each state has their own name for their scholarships and how theywork for studentsC. Investment and Taxesa. Tax exempt investmentsi. Tax free, never will pay a tax on itii. Ex: FL municipal bondb. Tax deferred investments i. Retirement plans (IRAs, Keoghs and 401Ks)1. 401 Ks are for-profit businessesa. Employer and you put money in it (tax free) and then you have it when you retire (and taxes start)ii. Tax-deferred annuities1. Put large amount in a lump and then each month, you pull out so much2. The longer you live, the more you get out of it and the better deal you get3. Original amount can be fixed or it can go up or downiii. Series EE U.S. Treasury Bondsc. Capital Gainsi. Refers to profits from the sale of capital assets, such as real estate, stocks,or bondsii. Capital is another word for moneyiii. Buy a house and rent it out to othersiv. Opposite is Capital Loss1. Sell it at its loss2. Reduces you taxesa. Can balance things outb. Not necessarily a bad thingD. Children’s Investments and Taxesa. Custodial accounti. One parent serves as custodian for the child act under the Uniform Gifts to Minors Act1. $10-$13,000 for each child and not have taxes on themE. Tax Deferred Retirement Plansa. 401 Ki. Trying to move everyone to theseb. IRAsi. Deduct contributions1. Limited to the governmentii. Annual contribution of $4,000 per couple 1. Amount can change over timeF. Estate and Gift Tax Transfersa. If a person died in 2000, he or she could have left up to $675,000 to beneficiariesfederal tax freei. Right now its over $1 millionii. It changes, Congress fights over amountiii. State tax depends on stateG. No state income tax in:a. Alaskab. Washingtonc. Wyomingd. South DakotaH. Sales Taxa. In more states it ranges from 4-7%b. Florida is 6%I. No Sales Tax in:a. Alaskab. Delawarec. Montanad. Oregone. New HampshireJ. Best Place’s Cost of Living Calculatora. Average is 100i. Austin, TX is 102b. Housing costi. Largest defining factor in cost of
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