Tax law in the United States of America is a complex system that includes a variety of taxes at the federal, state, and local levels. It regulates the collection of revenue by the government to finance government programs, services and infrastructure. Let's take a look at the main aspects of US tax law.
Federal tax law is governed by the Internal Revenue Code, which is administered by the Internal Revenue Service (IRS).
1. Personal Income Tax: This is the most important type of tax paid by individuals based on their income. Federal income tax rates are progressive, meaning that rates rise as income increases. Tax rates vary from 10% to 37% depending on income level.
2. Corporate Income Tax: Corporations are also required to pay tax on their profits. Since 2018, the corporate tax rate has been set at 21%.
3. Inheritance and Gift Tax: The federal government also levies a tax on the transfer of assets through inheritance or gift. There are certain thresholds after which taxation begins, and rates vary depending on the value of the assets.
Each state has its own tax system, which can differ significantly from other states. The main types of taxes at the state level include:
1. Personal Income Tax: Many states levy their own personal income tax. The rates and structures of this tax can be flat or progressive.
2. Sales and Use Tax: This is the primary source of revenue for most states. Sales tax is levied on goods and services sold within the state, while use tax is levied on goods purchased outside the state but used within the state.
3. Property Tax: States and local governments collect real property tax, which is usually paid by owners of homes and commercial properties.
At the local level (counties, cities, municipalities) taxes are also levied, which may include:
1. Property Tax: Local governments typically collect property tax to fund local services such as schools, police, fire departments, and infrastructure.
2. Business Taxes: Local governments may levy taxes on businesses, including license fees, gross receipts taxes, and other business taxes.
US tax law also provides a number of benefits and tax credits for individuals and businesses, including:
1. Tax deductions: Reduce taxable income. The most common deductions include deductions for medical expenses, mortgage interest, and charitable contributions.
2. Tax Credits: Directly reduce the amount of tax payable. For example, Child Tax Credit and Education Tax Credit.
Tax law in the US is complex and multi-layered, covering various types of taxes at the federal, state, and local levels. Each level of government has its own rules and requirements that affect taxpayers. Understanding the basic principles of tax law is critical for individuals and businesses to ensure tax compliance and manage their tax obligations as effectively as possible.
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Serhii Floreskul
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Violetta Loseva
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