2008 Married Filing Jointly Tax Brackets
Question: Married Filing Jointly. How does the $10,700 deduction apply to our income tax?
According to the 2008 tax rates & brackets for “married filing jointly with combined income of $105,000,” our tax is $8,962 plus 25% of the amount over $65,100.
This comes out to $8962 + $9975 = $18,937.
Is the $10,700 deduction applied to the $18,937 or is the deduction subtracted from our gross income of $105,000?
Also, we plan on buying a home in Jan/Feb 09. If we paid a total of about $20,000 in mortgage interest next year, will there be a significant tax benefit? Assuming our income is unchanged and we have no other deductions or allowances. Thanks.
Answer: From your total income you will subtract certain deductions such as student loan interest and IRA contributions if they apply to you. From that number you will subtract the standard deduction of $10,700 plus the one personal exemption of $3500 for each member of your household. Assuming there are just two of you, your Taxable Income would be $105,000 – 10,900 – 7000 for a total taxable income of $87,100. The tax on $87,300 would be $14,469.
More importantly is your statement about buying a house. Under the new tax law just passed if you purchase your first home between 4/8/08 and 7/01/09 you are eligible for the first time homebuyers credit. This credit if a refundable credit of up to 10% of the purchase price of the home or $7,500 whichever is smaller.
Because you are purchasing this home in Jan/Feb 09 you have the option of claiming the credit on either your 08 or 09 return. So, even though you didn’t close by the end of the year, you could still claim the credit. Just make sure you close on the home before you file the return. If you don’t you would be able to amend the return to claim the credit.
Here’s the catch. The credit needs to be repaid at the rate of $500 per year for the next 15 years. This amount will come out of your future refunds or added to your future liability.
To answer the last part of your question, yes, $20000 in mortgage interest would have a significant impact on your next return.
Analysis: Taxes for most Ohioans wouldn’t change
Just 1 percent of taxpayers in Ohio earn more than $250,000 in federal tax-able income and would be subject to a tax hike with President Barack Obama’s tax proposal, according to exclusive data from the Ohio Department of Taxation.
Married Filing Jointly Tax Brackets
One day, just like the rest of us, you are going to die.
In the UK approximately 750,000 people die per year, and almost 70% of them die without a Will. This is known as dying “intestate”. When a person dies intestate, under the law of England and Wales, the law then decides how the assets are inherited.
Imagine for a moment, if a husband dies without a will leaving a wife and 2 children. If the house is jointly owned, his wife would then own it completely, as well as his personal effects and chattels and any other jointly owned assets. She is then entitled to the next 250,000 (as at Jan 2009) worth of the estate after which she has a life interest in half the remaining assets and his children receive the other half, divided equally between them.
Doesn’t sound too bad does it?
If the house was a tenancy in common, then the wife would receive his personal effects and chattels and any jointly owned assets, 250,000 worth of the estate which would include the value of his half of the house (she already owns the other half by joint tenancy) after which she has a life interest in half the remaining assets and his children receive the other half, divided equally between them.
If the house is worth more than 250,000, the children may wish her to sell to recover their share of the estate.
Imagine if they are unmarried and the house is jointly owned, the partner would own it completely as well as any other jointly owned assets. The remainder of the estate would pass to his children equally.
The partner receives the house and that is about it. The partner may have to sell to realise the capital to continue her lifestyle.
If they are unmarried and the house was a tenancy in common, she retains the half of the house she is already legally entitled to, any other jointly owned assets and the remainder, including the value of the other half of the house passes to his children equally.
The children’s share of the estate will be tied up in the other half of the house. The partner may have to sell the house or purchase the remaining half should the children require their share.
Now, the children may be too young to want to realise their share from the examples above, but is it not much better to have examined these risks in advance and make a will that best reflects not only your wishes, but safeguards the interests and the relationships of the ones you care about?
Tax changes of new year include IRA conversions
The new year brings many tax changes. Many tax breaks are phased out. The changes below are the current state of the law. It is always possible for Congress to act to extend or replace disappearing provisions.The House passed a bill that extended many of these provisions, but the Senate was unable t…