If you plan with TOTAL, its good practice to ensure the state tax rates are entered for all of the states your clients reside in and the rates are up-to-date each year. The Tax Foundation has a great resource for 2016 state tax rates. The online edition of TOTAL includes a feature allowing Money Tree to populate the tax information for all states and territories available in the program’s settings.
The Tax Foundation’s State Individual Income Tax Rates and Brackets for 2016
The twenty three states listed below had tax changes in 2016.
- New York
- North Dakota
- Rode Island
- South Carolina
- District of Columbia
*Using the 2015 tax rate. At the time of the 2015 state tax update the 2014 tax rates were used for these states as the 2015 rates were not available.
The Tax Foundation’s article features a great graphic highlighting the top marginal tax rate per state. The states with the highest marginal state tax rate are shaded in blue. California has the highest top marginal tax rate of 13.3%, followed by Oregon’s 9.9% and Minnesota’s 9.85%.
Massachusetts state tax rate was reduced from 5.15% to 5.10% in 2016.
Entered in TOTAL Planning Suite:
Massachusetts uses a flat income tax. Massachusetts’s tax rate is applied to federal adjusted gross income, which can be entered using the top right section for “State Tax as % of Federal Income”.
The top three brackets were eliminated as the temporary tax “millionaire’s tax” provision put in place in 2009 expired as scheduled at the end of 2015.
With no other changes, the top three brackets can simply be deleted. Breakpoints are entered in the bottom half of the state tax window. Make sure the tax rates are applied by selecting the appropriate option under “Apply Single and Joint tax tables below to,” which is AGI in this example. Enter the first tax rate in the “Tax Rate Starting at 0$” as 1.4%, and then continue to add breakpoints.
District of Columbia:
District of Columbia added a new top bracket of $1,000,000 with a 8.95% rate. The tax rate used for the previous top bracket of $350,000 was lowered from 8.95% to 8.75%. The state exemptions were also adjusted.
Entered in TOTAL:
For updating this information, the new $1,000,000 bracket can simply be added with the 8.95% tax rate. The tax rate for the $350,000 bracket can be changed from 8.95% to 8.75%. Breakpoints are entered in the bottom half of the state tax window. Make sure the tax rates are applied by selecting the appropriate option under “Apply Single and Joint tax tables below to,” which is AGI in this example. Enter the first tax rate in the “Tax Rate Starting at 0$” as 4%, and then continue to add breakpoints. Brackets and rates for single and joint filing are the same in D.C.