Taxes in the United States play a fundamental role in sustaining the government and providing essential public services to the population.
Understanding how they work is crucial for citizens and residents, as well as for those who are thinking of moving to the United States in the future.
In this article, we’ll explore the US tax structure, with a special focus on income tax, rates, tax obligations and possible differences between states.
Read on to find out everything you need to know!
The importance of knowing about taxes in the United States
Knowing how taxes work in the United States is vital for all individuals living in the country, whether they are immigrants or not.
Taxes are the main source of revenue for federal, state and local governments and fund social programs, education, infrastructure and health services.
Understanding tax obligations and taking advantage of tax deduction opportunities is a way of saving money and ensuring compliance with tax laws.
How does US tax work?
The tax system in the United States is complex and covers several categories, making it confusing even for people who were born and raised in the country.
It covers several categories, including income tax, sales tax, property tax and many others.
The US Internal Revenue Service, also known as the Internal Revenue Service (IRS)is the federal agency responsible for collecting taxes at the federal level.
The IRS collects income tax, payroll tax, capital gains tax and other federal taxes.
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What types of taxes are levied in the United States?
Now let’s take a closer look at the main types of tax levied in the United States:
Sales Taxes
Sales taxes vary from state to state and are applied to goods and services purchased. They are usually charged at the point of sale and can vary from 0% to over 10%, depending on the location.
Property Tax
Property tax, on the other hand, is a local tax that homeowners pay based on the assessed value of their property.
Fees vary significantly, and the funds raised are used to finance local schools and services.
Federal Income Tax
Federal income taxes are an important component of the US tax system.
They are paid to the federal government and vary according to each person’s income bracket (i.e. they are progressive).
State Income Tax
In addition to federal income taxes, a large number of states also levy state income taxes, with rates that can vary widely.
Income tax in the United States: how does it work?
Income tax in the United States is a crucial component of the country’s tax system. It is a financial obligation imposed on citizens and residents to finance government programs and public services.
Here are some details on how income tax works in the USA, including its rates and who has to declare it:
Income tax rates in the USA
Income tax in the USA is progressive, which means that the rates vary according to the taxpayer’s income.
Income tax rates are divided into several bands, with the lowest for more modest incomes (10%) and the highest for higher incomes (up to 37%).
In addition, there are various deductions, tax credits and other tax benefits that can impact the actual amount of tax owed by a taxpayer.
This makes the US income tax system more complex, but also offers opportunities to reduce the tax burden.
Who has to file a tax return in the United States?
The obligation to declare income tax in the United States depends on several factors, including income, residency status and the individual situation of each taxpayer.
In general, the following categories of people must file a tax return in the USA:
- American citizens: All American citizens, regardless of where they live, have an obligation to declare their income in the USA;
- Permanent residents: Permanent residents, also known as green card holders, are considered US tax residents and must declare their global income;
- Foreign tax residents: Foreigners who meet the criteria to be considered US tax residents must also declare their global income;
- Foreigners with work visas: Foreigners working in the United States on a work visa may be subject to income tax reporting, depending on the type of visa and the period of residence;
- Dependents: Some individuals who are considered dependents of other taxpayers may also be required to declare their income, even if they have their own income.
It is important to note that there are exceptions and nuances that affect the obligation to declare income tax in the USA, and the tax rules are subject to annual updates.
It is therefore advisable to seek professional advice or consult the IRS, the US federal revenue agency, to determine the specific tax obligations of each taxpayer.
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Are there tax differences depending on the American state?
Yes, state taxes are an important consideration in the USA. Each state has the power to set its own income tax rates, which means that rates can vary significantly from one state to another.
In addition, some states do not charge state income tax, which can be an important factor when choosing where to live and work in the United States.
Do immigrants pay taxes when they move to the US?
Yes, immigrants who move to the United States are also subject to the tax system.
This includes foreign citizens with work or residence visas, as well as those with tax resident status.
They must fulfill their tax obligations by declaring their income and paying the taxes due.
Conclusion
The US tax system is multifaceted and influences the lives of all residents and taxpayers.
Understanding income tax rates, filing obligations and the differences between states is key to making informed financial decisions.
Ultimately, the intelligent management of personal and business finances depends on a solid understanding of the tax system in force.
For this, it is essential to have the help of specialized professionals, such as those at D4U Immigration, the best immigration consultancy in the USA and Latin America.
Our experts are ready to help you answer all your questions about the US tax system and stay up to date with your tax obligations in the country.