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2 posts from October 2014

10/22/2014

2015 Tax Brackets Now Available

Federal tax return with penEstimated taxable income brackets and rates are now available for the 2015 tax year.  Each year, the IRS adjusts more than 40 tax provisions for inflation to prevent “bracket creep”.  Bracket creep is what happens when inflation causes taxpayers to be pushed into a higher income tax bracket or have a reduced value from credits or deductions even though they may have had no actual real income increase.

The IRS adjusts income thresholds, deduction amounts and credit values using the Consumer Price Index (CPI) to calculate the past year’s inflation. Yet, in a bit more complicated approach, each tax provision is also adjusted from a specified base year.

In 2015, the standard deduction will increase by $100 to $6,300 for single taxpayers and $200 to $12,600 for married couples filing jointly. The personal exemption for 2015 will be $4,000.

Also in 2015, the highest marginal income tax rate of 39.6% will be levied on single taxpayers whose adjusted gross income is $413,000 and higher and $464,850 and higher for married taxpayers.  The remaining federal income tax rates are:

  • $0-$9,225 single/$0-$18,450 married – 10%
  • $9,225-$37,450 single/$18,450-$74,900 married- 15%
  • $37,450-$90,750 single/$74,900-$151,200 married- 25%
  • $90,750-$189,300 single/$151,200-$230,450 married- 28%
  • $189,300-$411,500 single/$230,450 to $411,500 married- 33%
  • $411,500-$413,200 single/$411,500-$464,850 married- 35%

For more information on 2015 federal income tax rates, click here to see the Tax Policy Center’s Tax Facts chart.

Individual state and local income taxes are also complex and vary from state to state.  Their 2015 rates are harder to find and calculate.  To read more about 2014 state income tax rates, click here to see the latest review by a professional tax information organization.

10/15/2014

Wireless Device Service Fees & Taxes Out of Sight

Uncle-Sam-iPhone-TaxWireless communication services may be invisible, but the hefty tax bill attached to them can make a major household budget dent that’s hard to ignore.  A new report shows wireless telephone service fees and taxes are now at an all-time high.  In fact, with an average tax rate of 17.05%, the taxes you pay to use your wireless phone are now more than double most general state and local
sales taxes.

The Tax Foundation has released an extensive study comparing wireless device use tax rates to general sales taxes for each state as Congress is preparing to debate whether to levy new taxes on wireless Internet services.

Of the average 17.05% rate, 5.82% is a federal tax and the rest is made up of a combination of state and local taxes and fees.

The report shows consumers in seven states pay wireless taxes and fees that exceed 20% of their bills.  Those seven states include:

Washington – 18.6% + 5.82% federal tax

Nebraska – 18.48% + 5.82% federal tax

New York – 17.74% + 5.82% federal tax

Florida – 16.55% + 5.82% federal tax

Illinois – 15.81% + 5.82% federal tax

Rhode Island – 14.58% + 5.82% federal tax

Missouri – 14.58% + 5.82% federal tax

The state of Kansas is ranked 11th on the list with state and local wireless taxes and fees amounting to 12.87%.  Iowa is included with states that charge lower wireless taxes ranking 31st at 8.61%.  The states with the lowest state and local rates include Oregon (1.76%), Nevada (1.86%), Idaho (2.62%), Montana (6%) and West Virginia (6.15%).

The national average for general sales and use tax is 7.51%. So the report’s findings confirm taxes and fees on wireless telephone services are more than twice the average sales tax rates for most other taxable goods and services. In fact, if you happen to live in the cities of Chicago, Baltimore, Omaha or New York City, your effective tax rate for wireless services are in excess of 25% of the total bill.

The Tax Foundation’s summary calls the taxes and fees “excessive” and points out that “cell phones are increasingly the sole means of communication and connectivity for many Americans, particularly those struggling to overcome poverty.”  A government survey confirms that more than 56% of low income adults rely only on wireless communications and nearly 40% of all adults use only wireless telephone services.

The report is adding fuel to the heated debate about taxing access to the Internet and charging extra fees for high-speed Internet delivery services.  Currently, the Internet is considered an “information service” and access to it is not taxed.  The Federal Communications Commission has been in hot water since last April when a series of public hearings were launched on its plan to reclassify the Internet as “telecommunication services”.  The reclassification would make it easier to not only regulate, but also tax.

Reclassification has been a political hot potato.  Many Democrats argue it would help preserve the Internet as a communications tool for all Americans by guaranteeing unrestricted access while Republicans argue regulations would lead to taxation and eventual access restrictions because of higher costs.

Some Internet providers have requested Internet reclassification to support their efforts to charge website owners higher rates for faster consumer access.  Opponents argue that would allow only larger, richer companies to have more accessible ‘fast lane’ websites giving them an unfair advantage over competitors in the access ‘slow lane’.

Currently, a federal moratorium is in effect on state and local internet access taxes.  The news about the high wireless taxes on communications devices could put pressure on Congress to not only keep the moratorium in place, but also regulate the amount of state and local taxes that can be charged on all wireless services.

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