Tax Tip of the Week
900 N. Kings Highway, Cherry Hill, New Jersey 08034
856.667.4100 ·
215.563.0276 ·
Fax: 856.667.3652
For the week of
April 17, 2000
Don't fall for these common income tax myths
- Myth 1: If my income goes up by $1,000, I will be in a new tax bracket and my tax bill will increase by $1,500.
As you cross into a new tax bracket, all of your prior income remains in the same brackets as before. If your top bracket before was 28%, and an increase in income moves you into the 31% top bracket, only the top tier of income will be taxed at 31%. The income that previously was taxed at 28% will still be taxed at 28%.
- Myth 2: If I sell investment property and reinvest the proceeds from the sale within six months, I will avoid paying income tax on the sale.
Wrong. This was true under prior law and only for personal residences. The only way to avoid current income tax on a sale of investment property is to arrange a "tax-deferred exchange."
- Myth 3: The money I receive from an estate will put me into a higher income tax bracket.
This is not the case. Only the income you earn on the inherited property is subject to income tax. Money or property you receive as a gift or inheritance is not included in your taxable income.
- Myth 4: If I forgot to take a legitimate deduction on a prior tax return, I am just out of luck.
Not true. You can amend prior tax returns for up to three years. This is true whether you owe additional tax or are entitled to a refund.
If you have questions about your taxes (or you just want to clear up some "urban legend" about taxes), contact us. Please don't feel silly about asking any tax question. The tax laws are very complex, and they get worse every year. We will be pleased to answer your questions and to assist you with your tax concerns.
Click here to view previous tax tips.
"Tax Tips" are published weekly to
provide useful tax information. Return to this site every week for helpful tax-cutting suggestions, tax reminders,
and current tax information.
The information contained in this site is of a general nature and should not be acted upon in your specific situation
without further details and/or professional assistance.
If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list
to receive other tax-cutting information from time to time, please contact our office. We're here to help.
