Understanding Tax Bracket for Tax Filing in 2019 for NR in the US

by Mounica Kota | Mar 30, 2019 | global income tax, Tax credits, Tax Planning, Tax Preparation

Understanding Tax Bracket for Tax Filing in 2019 for NR in the US

The tax filing season for 2018 is just around the corner. However, the IRS has just released the updated tax brackets adjusted with inflation for 2019. If you are in the middle of tax filing for 2018, it is better to finish the same before moving to 2019 changes.

The latest iteration adjusts the tax brackets and certain credits according to inflation. But the first and foremost step is to figure out whether you are liable to file tax returns. The IRS’s website has a link which will help you identify whether or not you need to file returns.

However, the following simple criteria should help you understand the same. If your income exceeds these levels, you are liable to pay taxes. There still are seven tax brackets but there have been subtle changes to the income tax brackets.

10% tax rate
- If you are single and earn up to $9,700.
- If you are married and filing jointly and earn up to $19,400.
- If you the head of a household and earn up to $13,850.
- If you are married but filing separately and earn up to $9,700.
12% tax rate
- If you are single and earn between $9,701and$39,475.
- If you are married and filing jointly and earn between $19,401 and $78,950.
- If you the head of a household and earn between$13,851 and $52,850.
- If you are married but filing separately and earn between $9,701 and $39,475.
22% tax rate
- If you are single and earn between $39,476 and $84,200.
- If you are married and filing jointly and earn between $78,951 and $168,400.
- If you the head of a household and earn between $52,851 and $84,200.
- If you are married but filing separately and earn between $39,476 and $84,200.
24% tax rate
- If you are single and earn between $84,201 and $160,725.
- If you are married and filing jointly and earn between $168,401 and $321,450.
- If you the head of a household and earn between $84,201 and $160,700.
- If you are married but filing separately and earn between $84,201 and $160,725.
32% tax rate
- If you are single and earn between $160,726 and $204,100.
- If you are married and filing jointly and earn between $321,451 and $408,200.
- If you the head of a household and earn between $160,701 and $204,100.
- If you are married but filing separately and earn between $160,726 and $204,100.
35% tax rate
- If you are single and earn between $204,101 and $510,300.
- If you are married and filing jointly and earn between $408,201 and $612,350.
- If you the head of a household and earn between $204,101 and $510,300.
- If you are married but filing separately and earn between $204,101 and $306,175.
37% tax rate
- If you are single and earn above $510,300.
- If you are married and filing jointly and earn above$612,350.
- If you the head of a household and earn above$510,300.
- If you are married but filing separately and earn above$306,175.

How to Assess?

The first step of assessing your tax liability, you first need to calculate all your sources of income. This total income amount at the end is known as the gross income. You can then apply all the adjustments and exemptions from your gross income. This then becomes your AGI or adjusted gross income. It works as the starting point for calculating your tax liability.

Top #10 reasons to file your taxes every year

by Mounica Kota | Mar 23, 2019 | income tax, tax deductions, Tax Planning, Tax Preparation, tax savings

Top #10 reasons to file your taxes every year

It is a common tendency for all of you to wait until April to file your taxes. While it is all fine as long as you file taxes, the earlier you do the better it is. Gone are the days when filing taxes was a difficult and tedious job.

Every year about 10 million taxpayers end up paying $130 on average for estimated tax penalties. Thus, filing and paying your taxes every year on time will help you avoid such penalties.

With several government initiatives and tools in place, it is easier to get through tax filing these days. Here are the top reasons why you should consider filing your taxes every year and at the earliest.

Faster Processing

It is advisable that you do not file close to the deadline. It only delays the processing and in turn, results in slowing down the entire process. You might also run into the risk of submitting while the servers are under heavy load, further slowing down the process. The file at the earliest for faster processing of returns.

Proper Documentation

While the complexity of filing returns has come down by a considerable margin, it is far from ideal. One can still get overwhelmed by the entire process. It is recommended that you start early so as to figure out of there are any additional documents that you might need to submit.

Faster Refunds

Taxpayers who file their taxes earlier are more likely to receive their entitled returns early. Since you file early, there won’t be too many returns for the IRS staff to go through or process. And thus, they can complete them at the earliest.

Additional Time to Pay Taxes

Filing your taxes early will help you determine the amount that you have to pay to Uncle Sam. It must be noted that even though you can file your returns earlier, you do not actually have to pay any taxes till the 15^th April deadline. This will allow you to plan your taxes better.

Avoid Extension

There are certain circumstances, where requesting an extension for your taxes is much needed. Consider this, a person was carrying all their tax documents to the office and they get stolen on the way. Or a person lost his/her house to fire, burning down all the documents in there. These are legitimate reasons for filing an extension. Others, not so much. Instead of opting for extension and slowing down the process, it is better to get it done at the earliest.

Better Help

If you need the services of any tax agents, the most reputed ones will most likely be booked closer to the deadlines. In the event that you file your taxes earlier, you can seek professional help without having to wait.

Financial Help

If you are looking to utilize the FAFSA or Free Application for Federal Student Aid either for yourself or for someone else in your family, it is recommended to do it at the earliest. The earlier you file your taxes, the better are your chances of receiving the maximum amount out of it. The aid is dependent on the most recently filed return.

Identity Theft

Every year a lot of taxpayers are victims of tax fraud. In the year 2014, about 3 million people reported the same. It usually takes place if you wait till the end to file your taxes.

Clear Things up

Filing taxes earlier gives you ample time to fix if something is wrong with your taxes. This is one of the simplest and most straight forward benefits of filing your taxes every year and on time.

Buying a House

Your mortgage provider would want to have a ton of supporting documents from your end. These include W2 form, bank statements, tax returns and so on. Thus another added advantage of filing your taxes every year.

How is the Rental Income from Foreign Country taxes in US?

by Mounica Kota | Mar 20, 2019 | IRS, tax filing, Tax Planning, Tax Preparation

How is the Rental Income from Foreign Country taxes in the US?

The possibility is quite high that you might decide to invest in a home or other property type while staying in the USA. The tax implications of such earnings vary from country to country. For instance, a foreign country taxes have a minimum threshold in place.

Only if your income exceeds the threshold, are you expected to pay taxes on the same, however, if you are staying in the USA and the property or house generates some income, you need to consider both the countries.

You will have to look after the tax ramifications in the country where you have bought the property as well as the USA.

Classification of Foreign Property

Before we get started with the tax implications, it is important to understand the different classifications of rental properties. It would help you identify which tax treatment category you belong to.

As a rule of thumb, you would need to report any income that you earn outside of the USA, be it rental, dividends, interests etc. The USA has different thresholds for rental properties, depending on the duration for which the property was rented. The following table will help you better understand the same.

Your usage	Rented duration	Applicable Taxes
Nil	Anywhere between 0 to 365 days	Regular rental taxes are applicable
More than 15 days	Less than 15 days	Not required to report on the tax return
Less than 10% of the number of days it was rented for or 15 days	More than 15 days	Taxes on rental property and a vacation home are applicable
More than 10% of the number of days it was rented for or 14 days	More than 15 days	Taxes on a vacation home and secondary residence are applicable

Reporting Your Income

The IRS expects you to file your rental income in a foreign country just as you would do for a property in the USA. Though there are a few exceptions.

You would first need to calculate the total income for a fiscal year due to the rental property(s).
You then have to convert the amount into USD.
The IRS’s website has a link to Foreign Currency and Currency Exchange Rates, you can refer to this page for exchange rates.
The rental expenses can include:
- Any repair expenses
- Foreign local taxes
- A mortgage interest that you pay in a foreign country
- Travel related expenses if you have to inspect your property
- Any fees pertaining to the management of the property
One of the major differences is in the form of depreciable cost of the building portion that you own. It must take place over a period of 40 years.
In the event that you have to pay taxes on your foreign income in the native country, you can seek for offsets in your tax returns.
In your tax returns, you can mention the income and the tax deducted for the same which will help you avoid double taxation on the income.
Again, it largely depends on the understanding and double taxation agreement between the USA and the country where your property exists.
Apart from the above, you might have to file for FBAR, if you have set up a bank account in a foreign country to receive the payment for the rental property.
You might even have to file Form 8938 if the rental property is owned as a part of partnership, corporation or trust.

If you have any form of rental income from a foreign country, do not forget to report the same in your tax returns.

The top 10 Tax Tips for 2019 for NRI investors

by Mounica Kota | Mar 20, 2019 | NRI, Tax Extension, Tax Planning, taxes

The top 10 Tax Tips for 2019 for NRI investors

The top 10 Tax Tips for 2019 for NRI investors.While it is no secret that resident Indians have to pay taxes for a fiscal year. However, all NRI investors must also pay taxes for a fiscal year if applicable. Irrespective of whether they earned the money directly or indirectly, if they are liable, they must pay taxes on the same. As long as the income is generated in India.

Any income that is generated as a part of their investments or assets or business interests, is liable to taxes. The presence of tax laws means that there are different avenues to save money from tax liabilities as well. If you are an NRI and are looking for tax-related tips, here are some that you might find to be quite useful.

Section 80C

Just like resident Indians, NRIs also can benefit from investing in Section 80C. You can invest as much as INR 1.5 Lacs for a fiscal year in Section 80C as per the Income Tax Act of 1961 and enjoy a reduced tax liability.

Section 80CCD

Apart from the most common and obvious investment mode of Section 80C, there are a few additional ways to save money and taxes as well. You can invest in NPS instrument (Section 80CCD) and save additional money on the top of Section 80C. however, NRIs cannot invest in PPF, National Savings Certificate or any other senior citizen schemes.

Pan Number

Annual income exceeding a certain limit is subject to TDS. Section 206AA governs the taxes that an NRI is liable to pay. An NRI must furnish their Pan card details when they are investing in India. Failing to do so would result in you paying higher TDS amount.

Maintaining Status

The income tax liability of an individual depends on their annual income and residential status. Thus, it is essential to maintain your residential status as NRI. If you have any trips for India, ensure that they do not hamper your NRI status.

Home Loan

NRIs having any home loans in India can use it to claim deductions for their income tax. Under Section 24, NRIs can claim up to INR 2 Lac per year which they pay in interest towards their home loan.

Property Tax

If an NRI is paying any property tax for properties that they own, they can claim the amount as well. Depending on their tax liability they can save taxes.

Selling Property

As an NRI if you wish to sell any properties in India, you would have to pay applicable capital gains tax. It is usually split into short-term and long term capital gains. If you sell your property within 24 months of buying, it is short-term capital gain. And if you sell it after 24 months of buying, it qualifies as long term capital gain.

Health Cover

Most NRIs wish to come back to India to post their retirement. It would be a good idea to buy a health insurance plan. Buying it while being out of the country will help you overcome the waiting period of pre-existing diseases and offer tax cuts.

Mutual Funds

There are several mutual funds which can offer you tax deductions under Section 80C. The lock-in period of mutual funds is lower than other investment instruments as well.

NRE Account

Holding your savings in an NRE account can be beneficial as well. Since the interest earned is tax-free and the benefits would be available for two years after you shift back to India.

The above would help you better plan and manage your taxes.

5 Tax Benefits you should claim if you OWN A VEHICLE

by Mounica Kota | Mar 18, 2019 | Tax Planning, Tax Preparation, tax return, taxes

5 Tax Benefits you should claim if you OWN A VEHICLE

Tax Benefits of vehicle and driving are imperative for Americans to get to their workplaces.

You own a vehicle, then you must be aware of the tax deductions and write-offs you can do at the time of filing for tax returns.

When you own a car

oil
Gas
Repairs
Licenses
Insurance
Parking

If you are travelling more than 50 miles away for a job, then the miles travelled can be deducted. However, driving your car for any personal reasons, commuting to and from work, certain meagre tasks by employers like picking up mails on the way etc. are not eligible for any claims.

If you are driving a car for any volunteer work, then definitely you can claim the gas & mileage for driving to and from the place along with the parking charges & other tolls.
If you are driving a car for employers with commuter benefits program, then there are benefits available to you in the form of transit passes that include tokens, fare cards or vouchers for mass transit, Vanpooling, parking charges etc.
If you are driving a car fora business like a food truck or a mobile travelling photo studio or a mobile car-wash etc. then you can claim expenses as well.

When you own SUVs or trucks

If you are self-employed& you purchase an SUV or a truck, then the entire purchase price can be written-off during filing for tax returns.
You can also apply the bonus depreciation deduction for the vehicle while paying taxes.

While discussing tax write-offs on auto expenses, there are two major methods to be listed down.

Mileage method

In this method, your total business mileage covered by the vehicle is multiplied with the Standard Mileage Rate (SMR) which is fixed by the IRS to obtain the deduction. Different rates are set by IRS for categories like vehicles for medical or other moving purposes, vehicles used for charity purposes etc.

Actual Expenses method

Here, we sum up the total cost spent in the operation of the vehicle and then multiply it with the percentage of business use of the vehicle. While we calculate the total operation cost of the vehicle, we can include gas expenses, Insurance expenses, Maintenance expenditure, Licensing, Registration fees, Vehicle depreciation value (i.e. the depreciation value applicable to the business use of a vehicle) etc.

However, both of these methods produce different results each year. So, it is generally advisable to follow the Mileage method in the first year of purchase of the vehicle and later on, you can calculate the tax deductions yielding from both the methods & chose the one with larger deductions.

Hence to summarize, the major 5 tax benefits you can claim if you are the owner of a vehicle are:-

The entire vehicle’s purchase price can be written off while filing for tax return if you have bought a new SUV or truck by the end of 2017, specifically, the vehicle should be above 6000 pounds.
The depreciation deduction for a new SUV or a truck depends on the amount of time it has been used for business purposes. Suppose, an SUV has been purchased for $80,000 and has been used 90% for business activities then the deduction will be around $74000.
If a car has been bought by the end of the year 2017 & the registration fees have been paid by the last day of the year, then the registration fees are deductible. Also, the sales tax on the purchase is deductible if you are going to use the vehicle for business purposes.
Having a home office is an additional advantage for entrepreneurs while calculating tax deductions. If you are using a vehicle for business & you have a home office, then the percentage for which vehicle is used for business is increased &a major part of the automobile expenses of the owner are deductible.
If you have purchased a passenger car towards the last 3 months of 2017, and you are using it 90% for business purposes, then you can file for a deduction of up to $11,160 of the purchase price.

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