May 7th, 2015 by admin
Texas is proud of its “big” image, but not everything is big in Texas—especially the taxes. The great state is one of only seven states without an income tax. When others fork over their dough to their state governments, Texans can use the no-income-tax policy to their advantage throughout the year. Here are a few ways you can start taking advantage of Texas' no-income tax:
Start putting a little more cash in your personal retirement account to set yourself up nicely for the future. If you are under the age of 50, the max contribution to a traditional or Roth IRA is $5,500 and $6,500 for people over 50 years of age. For 401(k), 403(b) and 457 plans, the max contribution for a person under the age of 50 is $18,000 and $24,000 for people over 50. If you own a SIMPLE plan, the max contribution is $12,500 for people under the age of 50 and $15,500 for people 50 years of age and older.
- Contribute to college savings plans
Reduce your child’s college burden by funding a college plan—a 529. The consumer plans include the Texas College Savings Plan, the Texas Guaranteed Tuition Plan, and the Texas Tuition Plan Fund. A financial advisor can help you open an account and walk you through funding options.
Everyone needs a rainy-day fund. If you are saving a hundred bucks or a few thousand, put it away. If it is easier for you to save each paycheck, make a plan to set aside a portion of your income weekly or biweekly to help pad your savings account.
- Make bi-weekly car payments
You have a little more money in your pocket after each paycheck than people in 43 other states. Use that extra cash to put you ahead on your car payment or any other installment loan. Instead of making monthly payments, consider spreading it out. Split your monthly payment amount in half and pay that amount every two weeks. You will notice at the end of the year that you have actually made an extra payment without feeling it. Regular, on-time payments look great on your credit and help you reduce the principal on your installment loan. When the principal goes down, the financing charges go down, and in the end, you have more money in your pocket.
Use the money you are saving on your income taxes to pay down your credit cards. Paying more than the minimum monthly amount reduces your interest, lowers your debt-to-income, and reduces your credit card utilization percentage. In the end, your credit score goes up.
Well, since there is no income tax, the state earns revenue elsewhere. Smokers foot the bill. In Texas, the cigarette tax sets smokers back an extra $1.41 per pack. If you smoke a pack a day, you are paying the state nearly $500 a year.
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