Managing Money March with Our Bridges Resource Library

This month, we dive into MONEY! Once we have money, we need to know how to keep track of it. And, of course, we will need to file taxes. Join us for Managing Money March!

March 5: Money Management Basics
March 12: Background Information About Taxes
March 19: Types of Income and Taxes on Earned Income
March 26: Doing My Income Taxes

This week, we investigate some background information about taxes – the WHY and the WHAT.

This Transition Tip is NOT Tax Advice!

Please note that no one should take anything in this article as tax advice. This article is SOLELY for information, and any tax needs should be taken to a professional in the field.

Bridges’ Support Always Available

Please remember that we at the Bridges Technical Assistance Center are eager to help you meet your money management – or other — needs.

Why Do We Pay Taxes?

Some people elevate complaining about taxes into a full-time job. Certainly, it’s not fun to pay extra money just “because we have to.” However, a world without taxes would be very, very different.

Governments use taxes to pay for government services. Taxes pay for salaries: from our elected leaders to agency staff members to those who protect us (fire, police, and military).

Taxes also pay for education, vocational rehabilitation, community colleges and state universities, and social benefit programs like Social Security. Every day when we ride on roads or public transportation, get on the internet, use water or electricity, or even just spend money, we enjoy the benefits of systems established and maintained by taxes.

Again, it’s fine to dislike paying taxes. Yet we don’t want to forget the many benefits we all receive BECAUSE we pay taxes.

Activities/Items Subject to Taxes

Income

Income takes many forms, and most are taxable. Taxable income includes earned and unearned income.

Earned income includes hourly wages, salaries, and independent contractor payments. Even cash received for short-term services, like babysitting or lawn mowing, is taxable earned income. Taxes on earned income include both regular income taxes and payroll taxes – additional taxes that are only due on earned income.

Unearned income includes investment and rental income. Unearned income is not subject to payroll taxes, so taxes on unearned income are actually LESS than taxes on earned income.

Please note: certain income is exempt from taxation. Tax-exempt income includes SSI (supplemental security income) payments and ABLE account funds (both growth and withdrawals – if spent on Qualified Disability Expenses). There are no income taxes on either SSI payments or ABLE account QDEs. For more information about ABLE accounts, check out the ABLE Accounts – Frequently Asked Questions Bridges Resource Library entry.

The Bridges Helpdesk will take a deeper dive into income in next week’s Transition Tip.

Purchase of goods

Sales and use taxes are applied to sales and purchases of items in Maryland. For most items, the tax rate is 6%, and merchants (the people selling items to us) add sales tax to the purchase price. Periodically, those merchants send collected sales tax to the state (and local government).

Even online purchases are taxable and subject to sales tax. However, if a seller does not do regular business in Maryland, that seller might not collect the sales tax owed.

Owning real estate

Those who own real estate (land, buildings, etc.) must pay real estate property taxes in Maryland. The land owner owes these taxes, and taxes are based on the value of the real estate.

While tenants are not directly responsible for real estate property taxes, landlords are, and those landlords include their expenses, including real estate property taxes, in the rent they charge.

While real estate property taxes are not based on a person’s income level, Maryland does offer property tax rebates for qualified low-income homeowners and renters.

Recording deeds for real estate

When recording a deed at the courthouse, a special tax called a Transfer Tax may be due. Of course, this is a special situation, and professionals involved in the transaction can help.

Transfers of wealth due to inheritances/estates

Again, this is a special circumstance, and rules surrounding these matters are complex. We include this for informational purposes.

Other taxes not listed

Please note that there are many taxes levied on the federal, state, and local levels, and this article does not seek to list them all. Please do not rely on this article and consult a tax professional for complete information and advice.

Next Week

Join us next week as we discuss types and income and income taxes.

Please check out the Bridges Technical Assistance Center Resource Library today!

Contact us

Follow the Bridges Helpdesk Facebook page for more transition tips, and please contact the Bridge’s Technical Assistance Center’s Free Helpdesk for Maryland Blind/Low Vision Transition Students, Families, and Educators anytime using:

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Email: Helpdesk@IMAGEmd.org
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This unique project is being coordinated through The IMAGE Center of Maryland, a center for independent living in Towson, and it is funded by a grant from the Maryland Department of Education Division of Special Education/Early Intervention Services.