Do Your Taxes by Yourself
Do You Know How To Do Your Taxes By Yourself? Learn From These Simple Tips
You’ve finally taken that big step and have retired. You look back and realize that you’ve been paying a lot of different taxes all throughout your working years. Most taxes have been paid on your wages like federal and state income taxes, social security tax, and Medicare tax, but now, some of that will change. When you do your taxes by yourself, they might be a little easier.
To begin with, you’ll stop paying taxes into the social security system and also Medicare, unless you continue to work some type of part time job. You’ll be able to save 7.65% in taxes that you had deducted from your wages. The following are some of the taxes you will still have to pay, although, maybe not as much:
Taxes on your income
You’ll continue to pay taxes on the income you receive, unless you have after tax accounts to draw from such as Roth IRA’s or various types of savings or brokerage accounts. Some sources of income that will require you to pay income taxes are pensions, annuities, traditional IRA’s, social security benefits, interest, dividends, and other types of pre-tax retirement accounts. It’s a breeze to file your taxes yourself with us.
The income taxes would include federal and state. However, many retirees sell their home and move to a state that doesn’t have a personal income tax. This alone, can be a big money saving item, especially when doing your taxes by yourself. Plus, when you sell your home, net gain up to $500,000, is tax free for a married couple, and $250,000 for a single individual.
Another portion of your retirement income that may be partially taxable is social security benefits. Depending on the amount of your total taxable retirement income, up to 85% of your benefits would be subject to federal taxes. Most states, though, don’t tax security benefits. When you do your taxes by yourself, we’ll pick this up automatically.
The cut off points for 2021 are as follows. For a single person, who has combined income of $25,000 to $34,000, will pay taxes on up to 50% of his benefits. Once the income level exceeds $34,000, then up to 85% of his benefits are taxable.
Married couples filing a joint tax return, who have a combined income level from $32,000 to $44,000, will pay taxes on up to 50% of their benefits. Once they exceed $44,000, they will pay taxes on up to 85% of their benefits.
State sales taxes
Sales tax on purchases you make are taxable by the state that you live in. There are four states in the USA that don’t charge a sales tax, but usually make up for it by much higher real estate tax. The average sales tax rate in the USA is 7.12%. Alaska is the lowest at 1.76% and Tennessee is the highest at 9.55%.
Real estate tax
Anyone that owns real estate will be paying taxes on the property usually based on the value of the land and improvements. Usually in most states churches are exempt from real estate tax. In addition to that, some states also levy a tax on tangible personal property, such as motor vehicles and boats.
Estate and inheritance taxes
Depending on the total value of your estate, an estate tax may kick in. At the present time, there is a federal exemption of $11.7 million dollars for a single person and $23.4 million for a married couple.
Previously enacted legislation will reduce the exemption to $5 million in January, 2022. Plus, the House Ways and Means Committee is tweaking the legislation to help pay for the new budget, and some proposals may have a hard time passing.
In most situations, an inheritance is not taxed, except for IRA’s and 401(k) accounts. There are special rules available that will give you options on how to best handle it.
Making the best with your retirement
Many individuals who are about to retire are worried that they may outlive their money, and for good reason. Due to the pandemic, many individuals were forced to withdraw money from their retirement accounts to support their families.
Many others didn’t have retirement plans where they worked and had little money to invest for retirement. Almost 30% of the USA workforce are in that predicament. The HBS Financial Group offers easy senior citizen income tax preparation.
As we mentioned earlier, moving to a different state that is favorable for retirees, might be a good move. Places like Florida have become very popular because of no state income tax, great weather, and affordable housing.
If possible, it usually is a good planning move to delay your social security benefits. If you can wait until age 70, you’ll get the maximum benefit. With people having a longer life span now, this additional income when you’re in 80’s or 90’s would come in handy.
Meeting with a competent financial advisor might payoff big time. He can analyze your personal situation and give you relevant tips to give you the best benefit.
Doing taxes by yourself in retirement
Unless you have a highly unusual situation with your finances, you can do your taxes by yourself at the HBS Financial Group with ease. We’ll ask you the right questions based on your tax situation and guide you through the simple tax filing. Should you ever need help, our USA based tech support stands by to assist.
What’s more, you don’t have to figure out what pricing tier you need. We only have one for any type return you have. From the very simple to highly complex, one low fee of $25, and that includes your federal and state returns too. Check it out here and give it a try with no obligation.