Just because tax season is definitely over doesn’t mean that you should be siting idly by waiting for next spring to come around. There is plenty of information out there you can use to equip yourself for the coming tax season, and all of the time in the world to do it. You go about your every day life and probably don’t even realize that taxes, in general, are everywhere you turn.

Knowledge is power, so we at France Law Firm are here to help explain some different types of taxes, what they’re applied to, and how they affect your wallet:

Taxes on Income

  • Income tax: These taxes are applied by the federal government, as well as 43 states and many local municipalities. Income taxes are applied to not just personal revenue, but business revenue and interest income as well. Ever heard of a tax bracket? These apply to income taxes and are usually progressive. What this means is that your rate of taxation increases with your income. It is through income taxes that you may hear of people trying to decrease the amount taxed with credits, deductions, and allowances.
  • Payroll tax: These taxes are subtracted from a workers’ paychecks every pay period. Employers are mandated by the government to match the amount deducted. Workers are taxed 7.65 percent of their income. This income is divided by Social Security (6.2 percent) and Medicare (1.45 percent).
  • Capital gains tax: These are what is paid on profits as a result of selling something, and are usually used in the world of stock and bond transactions. Not only that, but capital gains taxes can be applied to the sale of real estate.
  • Estate tax: These were created to prevent tax-free wealth to occur within the United States’ wealthiest families. It is applied when property is transferred after the previous owner’s death.
  • Inheritance tax: An inheritance tax is a form of estate tax that is imposed by the state itself rather than the federal government.
  • Gift tax: Rather than after a death has occurred, a gift tax is levied on a transfer of wealth during a person’s lifetime, once the amount exceeds $14,000.

Taxes on Property:

  • Property tax: This is also considered an “ad valorem” tax, and is imposed on the value of real estate or other personal property. They are charged on a reoccurring basis, and usually are held by local government.
  • Real estate tax: These are more fluid than property tax, because they are based on the worth of a property in its current condition, location, and market value. There are many other factors, such as an increase in taxes to fund local schools, or decreases in home values, that can affect this tax.
  • Other items that are subject to property taxes include cars, boats, any other recreational vehicles, and airplanes, factories, wharves, etc.

Taxes on Goods and Services:

  • Sales tax: Sales tax is one of the most frequently used methods for not just states, but also local governments, to raise revenue. The amount of this tax, of course, depends on region, but there are also other factors taken into consideration, like the type of item purchased. If you were to buy a nice pair of shoes, they would be taxed differently than your meal at a restaurant. Most “staple commodities” that you buy at a grocery store, like produce and meats (anything that is not prepared), may not be taxed at all.
  • Excise tax: These taxes are different, because they are placed based on quantities and not on the actual value of a product. The best example of this is seen at the gas pump, where the federal government can impose a tax of, say, 19 cents on every gallon someone purchases. This is a fixed number that doesn’t change based on the price that the gas station charges. On a state level, an additional excise tax is often added on top of each gallon of fuel you put in your car.
  • User fees: User fees are a little more self-explanatory, and are applied to a vast array of services, such as airline tickets, rental cars, toll roads, hotel rooms, licenses, and even financial transactions. They’re based on use—if you use it, you’ll pay a fee to do so!
  • “Sin” tax: A sin tax is placed on items like cigarettes and alcohol.
  • Luxury tax: A luxury tax is placed on items that are considered just that—a luxury! Think of expensive cars and jewelry as examples.

If you have questions about taxes, don’t wait until the final hour to get them answered. Contact France Law Firm today!