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Celebrity tax fireworks

By Kay Bell ·
Monday, July 2, 2012
Posted: 4 pm ET

What better way to celebrate our nation's birthday than with celebrity tax fireworks?

Let's start with TomKat. Yes, we are all so sad that Tom Cruise and Katie Holmes are splitting up after five years of marriage. But at least we now have endless speculation about the rumored million-dollar marriage contract.

And tax geeks get a bonus. We get to watch whether Holmes' divorce filing in New York will pose major tax troubles for Cruise.

The official word from the Holmes camp is that the soon-to-be-ex Mrs. Cruise established residency in New York City and then filed for divorce there because it's a more friendly venue than California when it comes to getting sole custody of the couple's daughter Suri.

But tax and celebrity watchers say that move also might be designed to gig Tom a bit tax-wise.

The Big Apple collects its own income tax of 3.876 percent on earnings of more than $500,000. That's on top of the Empire State's top millionaires-plus tax rate of 8.82 percent. So the combined tax rate for the wealthiest residents of New York City is 12.696 percent.

California, where the couple also has homes, has a high top tax rate, too. But compared to New York, the Golden State's maximum individual income rate of 10.3 percent seems downright minimal.

The buzz is that Tom has been trying to do everything legally within his power to avoid strong ties to New York City because of the high tax rate. He's counterfiled in California.

Good luck, Tom. If Katie gets her New York state of mind in the divorce, you could pay not only her but the state and city tax departments, both of which are notorious for going after anyone who has even the smallest connection.

Hill tax plea

Meanwhile, the tax miseducation of Lauryn Hill is over.

She has pleaded guilty to not sending the Internal Revenue Service returns for tax years 2005, 2006 and 2007.

Hill's sentencing has been pushed to November. Presumably in the coming months she'll figure out how to pay what she owes on the estimated $1.8 million she earned those years and avoid going to jail.

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