Taxes Q A Understanding What Is And Is Not Taxable

* Is Social Security retirement income taxable? Social Security retirement benefits are taxable, although it depends on your total income and civil status. Federal law states that an individual must pay taxes if he/she has annual Social Security retirement income of more than $25,000. If he/she has a married status, they must pay such taxes if the income is more than $32,000. However, if the Social Security retirement benefit is the recipient’s only source of income, then it is rendered to be non-taxable and there is no need to file a federal income tax return. * Are other pension payments (not SS) taxable? Just like Social Security benefit payments, other pension payments are taxable, although it is dependent on the recipient’s income and marital status. If such payment is only his source of income, then it may be tax-free. Other conditions are also stipulated on the Instruction Booklet of the Internal Revenue Services (IRS). * Are tips taxable? Tips are not taxable if they are given for a service not correlated with a taxable sale. For instance, the tip that you give when your luggage is carried or your hotel room is cleaned is not taxable. Another perfect example is the tip that you leave your waiter after your meal at a restaurant. In these instances, tips are not taxable. However, there are taxable tips. These are called mandatory tips, where it is given on a service that is associated in taxable sale. An example of such a tip is the amount that you have added to a certain meal or beverage (such as a bottomless ice tea, which you need to add a certain amount). Such tips are printed in the restaurant’s menu or placed in their advertisement, if any. * Is child support taxable? Child support is not taxable. This is neither deductible by the pay, or nor taxable to the payee. Topic 422 of the Non-taxable Income determined by the Internal Revenue Services (IRS) stipulates that child support payments are not included in taxable income. Thus, it is not included in filing a tax return. * Are gifts taxable? Gifts are taxable. It depends on the equivalent amount of the gift to be given. For instance, if you have given somebody a cash gift worth $11,000.00, it has an equivalent deductible tax charged to the giver. However, there are also stipulations in the law that allow you to give certain amounts, whether in cash or property, which do not have gift tax consequences. Gifts to charities or raffle draw winners have a corresponding deductible tax depending on the cash gift that they have received. The Act lowers the tax rate on the following taxes: 1) The marginal estate tax; the tax levied on your estate when you die. Note: This tax can be a burden on heirs if you die and leave behind assets for them, but no monetary funds to cover the tax on that asset. For example, if you leave behind a home, the government might tax up to 55% of its value. Your heirs will have to find a way to pay those taxes if he or she wants to keep it. The Act’s lower tax rate helps to decrease the amount of taxes on assets such as your home so that your heirs are not overburdened, or forced to quickly sell the asset at a low price so funds to pay taxes are available. 2) The generation skipping transfer tax (GST); the tax break given to you if you are transferring assets to a grandchild or great-grandchild. 3) The gift tax; the tax levied on assets that are given away as gifts before you die. Increased Asset Transfers The Act increases the amount of assets that can be transferred at death without the estate or generation-skipping tax.