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Tax Advantages Questions

What is a tax advantage?

A tax advantage is where an economic bonus is applied to certain accounts or investments that are tax-reduced, tax-deferred, or tax-free by statute. Most governments offer tax advantages to individuals to get them to put money into schemes or projects that are considered to be in the interest of the public. Examples of tax advantages are retirement plans, government bonds, and other long term savings. Listed below are questions answered by the Experts on issues relating to tax advantages.

Would a person benefit from a tax advantage if they were to form a corporation with investment money rather than investing in it from a personal account?

In most cases, there is usually no reason for having a corporation manage a person’s investment activities. Typically, the purpose of having a corporation is to manage business transactions and not investments. This helps to separate business and personal matters. If you are thinking of starting a business, it may be better to start off as being self-employed and depending on the result, consider forming a corporation. However, there are many tax advantages and disadvantages in having a corporation and you can read about them by visiting the links below:

Would the government offer any kind of tax advantage if you choose to own real estate property through a Trust and not directly?

In most cases, from a tax standpoint, trusts tend to have less favorable tax brackets and therefore bring down the tax advantages. But it would be wise to examine all the trust options because a few trusts offer some tax advantages depending on their terms.

In the State of California, is there a better tax advantage for a sole proprietor if he buys a car as opposed to leasing it?

In most cases, as well as in the State of California, there are many more tax advantages in terms of full sales tax deduction, depreciation expense and so on when a person buys a car instead of leasing one. However, if the person does not plan on keeping the car for a period of 5 years or longer, then a lease may be a cheaper option since they would not have to pay the full amount of sales tax on the vehicle but can deduct the tax that is actually paid.

I have a house in Indiana and am planning on buying one in California. If I claim the new one as my primary residence, will I benefit from any homestead tax advantages?

Income taxes are higher in the State of California than Indiana. There is a flat rate on state income tax in Indiana while California uses a sliding scale to determine taxes. When it comes to property, however, the tax rate all depends on what county you live in as well as the value of the home. But, typically, property tax rates are higher in California than Indiana. In case you choose to retain both homes, you would still need to pay property taxes on both. And if you use one home as a primary residence and the other as a secondary or vacation home, you could have a tax deduction on property taxes when filing your return.

When an individual files taxes or makes plans that involve tax issues, they could have questions regarding the kind of tax advantages available, how they could avail of them and so on. If you need any clarifications on this topic, put your questions to Tax Professionals for insights and information that will help you with your case.
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