- Definitions for Different Types of Taxes
- Cheapest State to Live in With Low Taxes on Retirement
- How to Calculate Corporate Taxable Income Formulas
- How to Calculate the Sales Tax on Multiple Items
- Common Tax Deductions for a Single Parent
- Can You Go to Prison for Failing to Pay Back Taxes to the IRS?
Taxes are financial levies imposed by governments that can affect you essentially any time you make money or spend money. Governments can impose taxes on a wide variety of economic activities and can be broad, for example flat taxes on all imports, or specific, such as on gasoline or alcohol. Income, property and sales taxes are three common types of taxes.
Income taxes are financial charges imposed on money you earn from various sources such as wages, interest on savings and dividend payments received from investments. Income taxes amount to one of the largest annual expenses of the average American family; it is possible to owe 25 percent of your income or more in income taxes. The amount of income tax you owe depends on your total income: the more money you make, the higher proportion of your income you must pay in income taxes. Many states impose income taxes in addition to the income taxes imposed by the federal government.
Property taxes are assessed by state and local governments for the ownership of property like land and structures on land. Homeowners must pay property taxes to the tax authorities that govern their region. Property taxes are one of the main costs of home ownership and can easily amount to thousands of dollars a year. The cost of property taxes is deductible on income tax returns; this can allow homeowners to avoid paying income taxes on money paid toward property taxes.
Sales taxes are applied to the sale price of various goods and services by state and local governments. For example, if you buy a $50 video game in a state that has a 6 percent sales tax, you will end up paying $53 for the game because of the tax. Sales tax rates vary from one state and locale to another. You may have to pay both a state and local sales tax on the same item.
States often impose special sales taxes on specific items to raise additional tax revenue. For example, states impose special taxes on the sale of gasoline, cigarettes and alcohol, which are often higher than the sales tax that applies to normal consumer items.