Franchise Filing States

franchise filing states

California State Taxes – The Facts

Taxes in California fall into three categories. There are taxes on income, on property, and on sales.

Let us look first at income tax. This is paid on personal income. It is a progressive tax that varies according to the size of the income. There are six tax bands. On the first $6,622 of taxable income 1% tax must be paid. This goes up to 2% for the next tax band between $6,623 and $15,698. The third tax bracket, $15,699 and $24,776, pays 4%. It is 6% on incomes between $24,777 and $34,394 and 8% on incomes between $34,395 and $43,467. Above that level tax is payable at 9.3%.

In addition there is a 1% surcharge on incomes over $1 million. This makes the highest income marginal tax rate 10.3% in California.

Tax returns must be submitted by April 15 every year. They should be made on Form 540EZ, Form 540A (short form), Form 540 (long form) or Form 540-ADS.

Couples can file joint tax returns. In this case the allowances for each tax bracket are doubled.

Sales tax varies across California. In January 2002 it was generally 7.25%. This figure includes state, county and local sales taxes. The state component is 6.25%. But in some cities and counties with their own powers of taxation it may be higher.

What is regarded as taxable may vary from business to business. Gift wrapping may or may not be counted as a taxable item for sales tax purposes. Some businesses treat it as a non taxable item. when food is gift wrapped the gift wrapping service may be taxed but the food itself exempt.

Taxes are payable on real estate in California. But there are many exemptions. Those who think they may be able to claim an exemption should apply to the local County Tax Assessor’s office for information. Some homesteads are exempt from local property taxes. Disabled citizens and senior citizens may be eligible for tax postponement. This applies to their principal residence only. It involves recording a lien against the property. Interest is charged on the postponed tax.There is also an assistance program for eligible home owners and renters. It consists of a once a year payment that is based on a proportion of the tax payable on their homes or included in their rent.

There are no inheritance taxes in California. Estate tax is being brought into line with changes in federal estate tax law and is currently being phased out. For people who died after January 1 2005 there is no need to file an estate tax return.

There are no intangible personal property taxes in California. Only real estate is liable for taxation under California taxation law.

More details can be found on the California Franchise Taxboard Website. The state’s instruction book will explain about the exemptions that are allowable and what refunds can be claimed. The instruction book also explains the program of voluntary fund contributions that can be made by California citizens.

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About the Author

Abhishek is a Tax Consultant and he has got some great tips on Filing And Understanding Taxes! Download his FREE 84 Pages Ebook, “Taxes Made Easy!” from his website http://www.Taxes-Guru.com/777/index.htm . Only limited Free Copies available.

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