What Are The Different Types Of Taxes That I Should Be Aware Of?

Tax and Accounting Services Cleveland
Taxes are something that everyone dreads.  It’s a never-ending battle between what you owe and what you can get back. But if you know the different types of taxes, it could be easier for you to keep track of your money and how much is owed or refunded. There are five main categories: Income Tax, Sales Tax, Property Tax, Personal Property Tax, and Death Taxes. And each has its own set of rules and regulations that need to be followed to receive the benefits from them. So before we go into detail about these five major types of taxes let’s first talk about why they exist in the first place!  The government wants more money than they have so tax laws were created as an incentive for people to pay and follow them. People and governments cannot function without financial support, so taxes are the main source of income for operating expenses such as police, road maintenance, healthcare, and building new roads! Taxes also allow for more freedom in a society where everyone has equal opportunities because there is an even distribution of wealth.

Income tax

Income tax is a form of taxation that governments impose on income. The amount of money you earn is taxed and the government uses this to fund different projects such as infrastructure, education, health care, etc. Income tax can also be used for redistributing wealth from those who have more to those who have less or none at all. In addition, it can generate revenue for public services like police forces and fire departments. Income tax has been around since ancient times but was not always so widespread as it is today. In the 20th century alone, many countries have had significant changes in their income tax policies due to economic circumstances and international agreements on global trade.

Property tax

Property tax is a fee that goes to your local government for property upkeep and maintenance.  Property taxes are usually paid every year, with houses typically going up in value by the time it comes time to pay again.  The amount of property tax you have to pay varies from state to state, but this is generally based on how much your home is worth in comparison with other homes in the area. Just like with other types of property or things that are bought and sold, the value of the property is affected by its condition, location, size, age, and style.

Sales tax

Sales tax is a way of charging customers for goods or services in the state they live in. The term “sales tax” can also refer to other kinds of taxes such as VAT (value-added tax) and GST (goods and services tax). Sales taxes are charged on nearly all transactions involving tangible property, which includes anything that can be bought and sold. If you buy something, there is a good chance there will be some sort of sales tax involved. Sales taxes are usually collected by retailers from shoppers when they make purchases. Depending on the country or region, this might happen at the time of purchase or before then – sometimes even months beforehand. The money raised through sales taxes helps fund government programs like education, health care, and defense. In most countries, sales taxes are automatically included in the price of a product or service that has one. Sales tax is never charged on food or medicine in some places, but this varies from place to place.

Social Security Tax

The Social Security Tax is a tax that employers pay to the government, which provides retirement benefits and disability insurance.   The amount of social security tax an employer pays is based on the salary of the employee. It’s usually deducted from each paycheck in equal amounts. Between 6% and 15% of income goes towards this tax, depending on your earnings. If you are self-employed, then you need to pay the entire 15.3% yourself.

Medicare Tax

Medicare Tax- employees pay 1 percent of their wages into Medicare, while employers pay another 1.45 percent. This has the effect of raising the total tax for some people to 3.65%. This can be very discouraging and cause many people to decide against working; however, there are ways that you can reduce your taxes by claiming certain deductions or credits on your return. An example is taking advantage of tax-deferred retirement plans such as 401(k)s and IRAs which allow you to defer paying income taxes on any contributions until later when they are withdrawn from the account in retirement years. Another example is getting a mortgage with points instead of just having cash out upfront because points are deductible on your federal return at closing costs and further reduce your income taxes for the following year during which you can deduct them.

Self-employed taxes

Self-employed taxes are a very important topic to every self-employed individual. It is the responsibility of the self-employed person to pay both the employee and employer share of these taxes themselves, which can be costly. There are many ways for entrepreneurs to lower their tax liability, such as by incorporating or becoming an S corporation; however, this will only work if you have enough income that you owe more than $400 in federal income tax per year. If not incorporated or an S corporation then your business profits will be taxed twice: once at the corporate level (either via the double taxation of dividends) and again when they’re paid out as salary or other types of payment (via withholding).

Estate Taxes

Estate taxes are a form of tax that is levied on the estate of someone who has died.  It is calculated by taking the net worth of an individual at their death and taxing it at set rates based on their level in society. Estate taxes were created to discourage large-scale inheritance without any obligations being paid back to society, but over time have evolved into a common way for governments to generate revenue.  The United States currently does not impose an estate tax, but many other countries do so as part of their standard taxation system. The amount that can be taxed varies from country to country depending on how much they want each person’s estate to contribute towards government spending programs. 

Leave a Comment

Your email address will not be published.