United states taxes

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The federal estate tax, often the subject of controversy, applies only after death and only if the estate is worth $5.34 million or more. Also, you may be able to avoid paying a number of excise taxes if you do not smoke, drink, or gamble. However, some excise taxes may be harder to avoid, including those levied on cell phone services, hotel stays, and gasoline purchases, according to Lundeen.

Here are seven ways Americans pay taxes.

1. Income taxes

 

Income taxes can be charged at the federal, state and local levels. At the federal level, the amount paid depends on a number of factors, including income and marital status. Lundeen noted the U.S. has a progressive tax system, consisting of seven tax brackets.    More>>

2. Sales taxes

Sales taxes are taxes on goods and services purchased. These are usually calculated as a percentage of the price paid. Sales taxes vary by state, and even by municipality. In some states, there are no sales taxes at either the state or local level.   >>More>>

3. Excise taxes

Excise taxes are similar to broad sales taxes, except they are charged on specific goods. States typically tax certain purchases, including gas, cigarettes, beer and liquor.   >>More>>

4. Payroll taxes

Both employees and employers have to pay the Social Security tax, one of two payroll taxes. For the Social Security tax, employees pay 6.2% of their wages, and employers match that for a total contribution of 12.4%.            >> More>>

5. Property taxes

Property taxes are usually imposed to fund local services. According to the Tax Foundation’s Lundeen, these taxes are based on the property’s market value, and are most often levied on real estate, but can also apply to other property, such as cars. In many instances, these taxes are deductible. However, according to the IRS, property taxes on real estate are only deductible if they are used to promote the “general public welfare,” but not if they are used “for local benefits and improvements that increase the value of the property.” Many homeowners also qualify for a mortgage interest deduction.

6. Estate taxes

The IRS defines an estate tax as “a tax on your right to transfer property at your death.” The estate tax is controversial, as it is seen by some as a penalty for dying.    More>>

7. Gift taxes

The gift tax is similar to the estate tax, in that it is a tax on transferring wealth. One important difference is that gift taxes involve two living people, Lundeen added. The federal government also has a far lower exemption level for the gift tax than it does for the estate tax. All gifts over $14,000 are taxable, with the tax to be paid by the recipient. The highest gift tax rate is 40% of the taxable gift amount. This tax applies not only to cash, but also to gifts like company shares or cars. Last year, Minnesota became the second state to implement its own gift tax, following Connecticut.

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