Taxation of individuals in the USA
The USA is considered a land of opportunity. But before moving, carefully study the city and county where you will live. This determines how much and what taxes you will pay. The local tax system is a three-tier structure covering the federal, state, and local levels. Taxes are levied on all sources of income. Experts at https://riseapps.co/ describe the main ones.
The main features of American taxation
Each state is practically a separate country, and each government at its own level has its powers. The feds do not interfere with local tax codes; each is unique and differs significantly from the others. In addition, fees are applied at the county and city levels within one state, so the American tax system is complex.
Please note! In the USA, the same amount can be taxed several times—at the center, city, and county levels. However, the rates at the state level are usually lower than the general federal one.
Income tax
Personal income tax in the country makes up more than 50% of all treasury revenues. Citizens and residents pay it, and non-residents must pay it on profits from the United States and its foreign possessions.
The system operates at a progressive rate of 10–37%, depending on cash receipts during the year. The following are subject to taxation:
- salaries;
- rent;
- dividends;
- capital gains;
- self-employed income.
Personal income tax is imposed in 43 states. Residents of Alaska, Wyoming, and five other states are exempt from it, and in Tennessee and New Hampshire, only interest and dividends are taxed.
Property issues
There are no federal taxes on real estate, but owners of residential or commercial real estate make regular deductions at the state, city, and county levels. The tax base is the cost of a house, apartment, or building. The tax rate depends on the financial needs of a particular tax jurisdiction.
Social Security
Insurance premiums depend on salary size. At the time of writing, the social security tax is 6.2% of the first $132,900 of income, plus 1.45% of the salary for compulsory medical insurance.
Self-employed individuals must deduct 12.4% up to $132,900 and 2.9% for compulsory medical insurance from their total income. Non-residents do not pay insurance premiums. In addition, they must take out voluntary medical insurance since state medical guarantees do not apply to them.
Passive income (on capital)
Federal tax rates vary: 0%, 15%, or 20%. The specific value depends on the status of the person filing the declaration:
- “Single”;
- “married, joint/separate declaration”;
- “head of the family.”
In particular, for persons with the status of “single” and passive income up to $38,600, the rate is 0%, from $38,600 to $425,800 – 15%, and over $425,800 – 20%. Capital gains on assets held for more than 1 year are taxed at a rate of 20%. The US tax system is very complex, which is why the profession of “accountant” and “tax (financial) consultant” is so prevalent in the country. Many misunderstandings arise because the migrant is not used to each state having “its own rules.” Therefore, when planning your arrival, carefully study the region where you will live.
