The federal government imposes income tax in the United States on the taxable income of individuals, corporations, estates, and trusts. The Internal Revenue Service (IRS) collects taxes and administers the U.S. tax code.
The Basics Of Income Tax
Income tax is progressive, meaning higher incomes are taxed at a higher rate. The federal marginal tax rates for 2019 are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The first $9,700 of taxable income for an individual is taxed at 10%; the next $9,700 is taxed at 12%; the next $40,500 is taxed at 22%; the next $161,500 is taxed at 24%; the next $204,100 is taxed at 32%; the next $510,300 is taxed at 35%; and any income over $612,350 is taxed at 37%.
In addition to the marginal tax rates, there is also a federal capital gains tax of 20% on profits from the sale of assets such as stocks, bonds, and real estate.
State and local governments also impose taxes on income, though the rates and thresholds vary. Most states have a progressive income tax, though a few have a flat tax. Seven states (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) do not have an income tax.
Other Forms of Taxes To Consider
Payroll taxes are also imposed on wages and salaries, generally split between the employer and employee. The federal payroll tax rate for 2019 is 15.3%, with 12.4% for Social Security and 2.9% for Medicare.
Self-employment taxes, similar to payroll taxes, are imposed on the net income of sole proprietorships and partnerships. The self-employment tax rate for 2019 is 15.3%.
Investment income such as interest, dividends, and capital gains is subject to taxation, though the rates are generally lower than those for wages and salaries.
The Logistical Side Of Income Tax
Several deductions and credits available to taxpayers can reduce their tax liability. Home mortgage interest, state and local taxes, charitable contributions, and medical expenses are the most common deductions. In addition, tax credits are available for various costs and activities such as education, childcare, and retirement savings.
Income tax is generally payable quarterly, though taxpayers can elect to pay their taxes monthly or annually. Taxes are typically withheld from wages and salaries by employers, and self-employed individuals are required to make estimated tax payments throughout the year.
The filing deadline for individual income tax returns is April 15th. However, taxpayers unable to pay their taxes in full can request an extension or arrange a payment plan with the IRS.
Disclaimer
For paid/sponsored articles, FintechMode neither endorses nor takes responsibility for the accuracy, timeliness, quality, and content of said articles. The statements, views and opinions expressed in paid/sponsored articles are solely those of the content provider and readers are reminded that Cryptocurrency products are unregulated in most locations and can be highly risky. Do your own research and consult relevant financial experts before making any investment decisions. FintechMode will not be held accountable, either directly or indirectly, for any harm or loss that may stem from or be linked to the usage or reliance on any information, goods, or services mentioned on this page. If you have any concerns, please email [email protected] or refer to our Terms & Conditions
