As I noted in a prior article, states are all over the board on their income taxation. An individual in a state with a high state tax rate could use a nongrantor trust to hold some of their income-producing assets and thereby avoid state income taxation on the income from those assets. Briefly, trusts may be taxed as grantor trusts or nongrantor trusts. A grantor trust is taxed directly to the grantor, so this type of trust doesn’t help if you’re trying to avoid your state of residence’s … [Read more...] about State Income Taxation of Nongrantor Trusts
Income Taxation
State Income Taxation
In this article, I’ll explain state income taxation in general. In the next article, I’ll look at how states tax trusts in particular. Everyone knows (or should know) that the federal government taxes the income you earn. But, depending where you live and how you earn money, states may tax your income, too. States run the gamut in the income taxation of individuals. Seven states don’t tax you at all: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. A couple states, … [Read more...] about State Income Taxation
Income Taxation of Same-Sex Spouses
Same-sex married couples are not treated as such for federal purposes and cannot file a joint tax return because of the Defense of Marriage Act (DOMA). However, the IRS has held that, in community property states, their income must be reported in accordance with state law. In other words, one-half of the income goes on each income tax return. Stephen C. Hartnett, J.D., LL.M. Associate Director of Education American Academy of Estate Planning Attorneys, Inc. 9444 Balboa Avenue, Suite 300 San … [Read more...] about Income Taxation of Same-Sex Spouses
