What Are The Main Types Of Taxes In The USA?

Federal, state, and municipal are three Types Of Taxes In The USA. These Tax Types together determine the tax liability of the taxpayer. Taxes in the USA are levied on different sources of income including salaries, wages, gifts, dividends, profit from the sale, investments, and imports, etc.

Types of Taxes in the USA

Taxable income in the US includes income from self-employment, independent labor, capital gains, wages, profit from the sale of real estate, etc. Your tax liability will also be determined by the state in which you reside and the area in which you reside. The different tax rates are applicable to different states in the USA.

• Federal taxes:

Federal taxes are the main source of funding for the federal government. The federal tax is directly paid to the Internal Revenue Service. The revenue collected via federal taxes is spent on various essential programs such as education, relief programs, and transportation.

• State Income Tax:

Tax rates vary by state; they are typically either flat or progressive, depending on the form. However, some states in the US don’t require you to pay state income taxes. Florida, Washington, Alaska, South Dakota, and Florida don’t have state income taxes.

• Community or Municipal tax:

Every community in the state has the authority to impose community tax or local tax.

Tax Types based on the earning source

The three basic Types of Taxes in the USA fall under this heading: taxes on income, goods and services, and property.

• Tax on income:

It includes income tax, payroll tax, estate tax, and capital gains tax.

Income taxes:

Income taxes are withheld from the income earned through a job or business venture. Interest income also falls under this category. The current federal tax rate ranges from 10% to 37%, while state income tax is from zero to 13.3% in California, as per the Federation of Tax Administrators.

Payroll tax:

A tax deducted from an employee’s paycheck by the employer to contribute to the Social Security and Medicare funds.

Estate tax:

It is levied after a property passes to a living person in the event of the death of an individual.

Capital gain tax: 

It is imposed on the profits earned from the sale of real estate, stock, or other similar assets.

• Taxes on goods and services:

Sales tax:

It is charged when your purchases are retail transactions. A fixed percentage of the price is imposed by the state and local agencies.

Excise tax:

These taxes are based on the quantity of the item. For example, a federal excise tax of 18.4% per gallon on gasoline, regardless of price.

User fees:

This tax is applicable to the use of infrastructure components in a public place. It includes toll taxes, tax on airplane tickets, etc.

Sin tax:

Tax applicable on the adult consumption such alcohol and cigarettes.

Luxury tax:

A tax applicable to an expensive item such as jewelry.

• Tax on property:

Property tax:

It is a tax applicable to any property or real estate owned by an individual.

The real estate tax is applicable when a person buys a property. The tax is based on the assessment value of the property.

Personal Property tax: 

It is an annual tax imposed on mobile assets such as RVs, mobile homes, cars, and boats.

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