In Watertown, Minnesota, income tax is imposed on most sources of income that a person receives in a given year. Under federal, state, and most local laws income from all sources can be taxed. The federal government has the constitutional power to tax income thanks to the 16th Amendment, which was enacted in 1916. Before that time, the U.S. Supreme Court had repeatedly declared the federal income tax unconstitutional, but individual states, including Minnesota were free to impose an income tax if they saw fit.
Everybody in the United States must pay the federal income tax. However, you only have to pay the state income tax of the state in which you reside. You should speak with an accountant or tax lawyer in Watertown, Minnesota if you aren't clear about what system your state has.
Income Tax Deductions in Watertown, Minnesota
A tax deduction is simply a reduction in the portion of a person's income which is taxable. For example, if someone makes ,000 per year, and gets a ,000 tax deduction, their taxable income is ,000.
Don't confuse a tax deduction with a tax credit. A tax credit simply reduces your tax bill by the amount of the credit. A tax credit normally reduces your tax bill more than a deduction of the same amount.
Many common expenses in Watertown can be deducted from your taxable income. They include mortgage interest, charitable donations (if property documented, of course), the cost of tax advice, union dues, and many others.
How Can A Watertown, Minnesota Tax Attorney Help?
Income tax laws can get quite complex, especially when large amounts of money from multiple sources are involved. It would not be a bad idea to call a Watertown, Minnesota tax Attorney to avoid the consequences of under-paying, and to prevent you from over-paying.