tax management

The Different Types of Taxes: Which Should You Be Paying?

You can expect your tax refund about 21 days after you e-file your taxes. However, to get this money back from the government, you must file your taxes correctly.

This article will help you better understand which types of taxes apply in various situations. When you file your taxes right, the IRS won’t have any reason to penalize you. Read on for a few common taxes that most people pay.

Tax

Income Tax

Income tax is the most common type of tax in the United States. When you report wages, the government makes you pay income tax. This is a percentage of your salary that goes toward funding the federal government.

The amount you pay depends on your tax bracket. Here’s an overview of the federal income tax:

  • 12% of incomes exceeding $10,275
  • 22% for earnings above $41,775
  • 24% for earnings above $89,075
  • 32% or incomes above $170,050

When filing for income tax, there are three different filing statuses:

  • Single
  • Married filing jointly
  • Head of household

Each has its own rules when it comes to filing tax forms. Confirm your state’s rules and regulations with a tax advisor.

Property Tax

Property tax is an annual tax that’s paid by the owner of a property. It’s calculated by multiplying the market value of your property by a specific tax rate.

Each state has different rules on how they determine this value. Click for tax management advice on your state’s property taxes.

Sales Tax

Sales tax is a tax on purchases. The tax amount is a percentage of the sale price. The retailer collects these taxes.

Sales taxes are imposed at the state level, so the rate isn’t uniform. The exception to this rule is if you live in an area where there is no sales tax, such as Alaska.

Self-Employment Tax

If you are self-employed, you need to pay the employee and employer portions of Social Security. The self-employment tax rate is 12.4 percent for Social Security taxes. You must submit this payment in addition to regular income tax.

Excise Taxes

Excise taxes are charged on the production and sale of specific goods, such as cigarettes or alcoholic beverages. Businesses pay most excise taxes. You don’t have to pay them if you’re just buying a product.

Gift Tax

The gift tax is a tax on the transfer of assets from one person to another. The giver of the gift is responsible for paying taxes on that gift. It applies when you give money or property worth more than $15,000.

File the Types of Taxes the Right Way

If you want to avoid a surprise bill at tax time, stay up to date on what types of taxes apply to you. Besides income tax, property tax and self-employment tax are two common forms of taxation that you should be aware of as an American citizen. If you file a complete and accurate tax return, you’re likely to get back some of the money that was deducted from your paycheck throughout the year.

Read our finance articles so you can use your tax refund wisely when you receive it.

Check Also

How to Know I Am the Beneficiary of a Term Insurance Policy

How to Know I Am the Beneficiary of a Term Insurance Policy

Life insurance is an essential financial tool for families. It provides financial security and peace …