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States That Don’t Tax Military Retirement Pay

Military veterans should consider retiring to one of these states if they want to lighten their tax burden

Many people intend to retire in a state where they can get the most bang for their buck, and military veterans are no exception. For them, this often involves finding a state that doesn’t tax military retirement pay, or else offers a generous exemption.

In the lists below, you’ll find a  breakdown of how military retirement pay is treated by the tax codes of the various states. In those states not included, military retirement pay is fully taxable.

States with No Income Tax

At the top of the list are the nine states that have no state income tax at all. By default, military retirement pay is completely exempt from tax. These states are: Continue reading “States That Don’t Tax Military Retirement Pay”

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How to File Taxes When Your Spouse Moved From a Different State

If your spouse moved from a different state, you might be unsure how to file your state taxes.

“In 2013 I was a full-year resident of New York State and got a W-2 in NY. However, my wife was a part-year resident of NY (the other state being Ohio) and got two W-2s, one from NY and one from OH. So for our NY State return are we full-year residents or not?”

You may find yourself in a situation like the example above. If so, the first important thing all married couples should note before they try to deal with a complicated state tax situation is that they can actually file separate state tax returns, even if they file a joint federal return.

Filing Jointly vs. Filing Separately

Most married couples will opt to file their federal taxes together, using the married filing jointly filing status, because it provides the greatest benefit. It’s only advantageous to use the married filing separately status in very limited situations.

Even though it makes sense to file a joint federal return, if your state situation is complicated enough, it may make sense to file separate state returns. 

Take the example listed above; the man’s situation is pretty simple- he was a resident of NY for all of 2013. It’s pretty clear that he has to file a NY resident return. This will tax him on all of his income for the entire year, no matter where it was earned.

His wife’s situation is more complex because halfway through the year she moved from OH to NY. This means that she needs to file an OH part-year resident return and then a NY part-year resident return.

Her OH part-year resident return will tax her on all of her income (no matter where it was earned) for that portion of the year that she was a permanent resident of OH. Her NY part-year resident return will tax her on all of her income (no matter where it was earned) for the portion of the year that she was a permanent resident of NY.

Some taxpayers may opt to go ahead and file a joint return even though one spouse was a part-year resident. It’s certainly more convenient, and if you moved early in the year, it probably won’t end up making that much of a difference. Plus it could actually end up saving you money on tax preparation fees.

Phew! That’s a lot of state tax information for one couple.

For more information about the supremely complicated world of state taxes, check out some of our other blog posts:

State Income Tax: Living in One State, Working in Another

Filing Taxes in Two Different States – What You Need to Know

Photo via Graham Fletcher on Flickr

File Your Taxes Today

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Capital Gains Tax 2014

Capital Gains Tax 2014 remains almost the same as last year’s tax.

The fiscal cliff deal, officially known as the American Taxpayer Relief Act of 2012 increased Capital Gains Taxes in 2013.  The 2014 Capital Gains Tax rates remain almost the same from last year.

For those new to issues of taxation, the IRS defines a capital gain this way:

Almost everything you own and use for personal or investment purposes is a capital asset. Examples include a home, personal use items like household furnishings, and stocks or bonds held as investments. When a capital asset is sold, the difference between the basis in the asset and the amount it is sold for is a capital gain or capital loss.

There are two different types of capital gains:

  • short-term capital gains
  • long-term capital gains

2014 Tax Return Coupon

 

A short-term capital gain results from selling an asset held for one year or less. A long-term capital gain results from selling an asset held for longer than one year.

This distinction is important because each are taxed differently. Continue reading “Capital Gains Tax 2014”