Types of Tax
You need to understand the types of taxes before you start earning money from them. Types of taxes: There are many different types of taxes you might have to pay if you happen to be a resident of USA, although some are not commonly known as such. Some examples of common types of taxes include: Income tax (instructions), Death tax (instructions), Property tax (instructions), Import/export tax, Employment tax and Sales tax. Understanding these types of taxes will help you a lot in understanding how to make money.
Progressive taxation: The progressive taxation system is one form of taxation that is based on your net income after all deductions are made. In this type of taxation your marginal rate goes up every single cent you earn over the basic threshold amount. Due to the progressive nature of taxation the burden of taxation generally starts from low and increases steadily as you move towards the higher end of the scale.
Capital Gains Tax: The capital gains tax is another type of taxation you should be aware of when thinking of making money from investments or other sources. The capital gains tax on the sale or ownership of an asset is calculated by taking the capital gain into account and any gain realized on the sale is termed as the capital gain. For highly paid individuals and businesses a bigger slice of the profits will be deducted in this manner making it easier for lower income people to pay taxes at a minimum rate. There are many different rules and regulations governing this form of taxation and are discussed in more detail in the IRS website.
Income Tax: Most common type of taxation is the income tax where the amount of money you earn is subject to income tax. The amount you earn is classified as personal income and is subject to taxation on a tax basis. The rate of taxation depends on your filing status, i.e. whether you are single or married and whether you are employed or self-employed. All these categories and more are described in detail in the IRS website on Income Tax.
Sales Tax: This type of tax is imposed by states as a way to collect property taxes from buyers of certain types of properties. Unlike income tax, which is usually based on personal income, sales tax is imposed based on the value of the transaction. The regressive tax system in states makes this mechanism more complicated with the fact that each sale prices differs from the previous one. This makes it difficult for retailers to know what their tax obligation is. In order to discourage people from underpricing the items they buy and from overpricing their goods, the states have set reasonable restrictions on how much the seller should charge.
Property Tax: Like the sales tax, property tax is imposed on real estate transactions. This type of taxation is imposed according to the value of the property. Real estate is broadly classified into four categories- residential, commercial, industrial and vacant land. Vacant land is any area that does not require development and is left unoccupied. It imposes a higher percentage rate than the other categories and can be assessed progressively.