CPA Scott Adair from the New York State Society of CPAs discussed tax brackets and how you might be able to lower yours Monday on News 8 at Sunrise.
“Tax brackets basically identify what our total taxes will be for the year,” said Adair. “It helps you determine whether you’re going to get a refund, or whether you are going to end up owing somebody. Generally speaking, it depends on how much income you’ve made during that past year.”
Adair said there are seven tax brackets for each filing category and they vary by state. “What we have to recognize is that tax brackets for the federal government are anywhere from ten percent to thirty-nine point six percent, and then the states all have their own tax brackets,” he said. “Pennsylvania, as an example, has a flat tax bracket. We all know that New York State has a varied tax bracket, just like the federal government does, and there are seven states that actually have no income tax.”
According to Adair, there are things you can do to get into a lower tax bracket. “The way to do that effectively is to take a look at your itemized deductions,” he said. “Take a look at things like your spending on medical expenses, things like your house costs, your property taxes. Charitable contributions is another one to take a look at as far as lowering your tax bracket.”
You can also increase your contributions to a retirement plan. “One of the big things that we talk a lot about when we’re doing financial planning, is making contributions to your 401-K’s and your IRA’s,” Adair said. “Make sure you take advantage of those things, as well as your flexible spending accounts through your employers to help lower your taxable income.”
When it comes to married couples, tax brackets can be a little trickier. “I think this is something that we commonly hear about as the ‘Marriage Tax Penalty,'” said Adair. “When you combine two like incomes, it could potentially put that second income into a higher tax bracket. You need to take a look at whether or not you need to file jointly, if that liability is the proper way to go, or separately.”
If you have questions about tax brackets and your filing status, consult a trusted CPA or visit the NYSSCPA website, click here.