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Tax Guide US

In United States, the residents are supposed to pay taxes on their worldwide income. On the other hand, as far as non-residents are concerned, they are supposed to pay taxes on their US sourced income. Additionally, they are also supposed to pay taxes on all income that is sourced from within the US.

There are various different applicable slabs of taxation that are levied in US as far as personal income is concerned. The top income tax rate in this regard is around 37%. This does not account for long-term capital gains and qualified dividends. There are different tax slabs that are applicable depending on the marital status of the resident. These tax rates are given below:

Tax Rates levied for Single Taxpayers in the US

For Single Tax Payers in the United States, the following tax rates are applied:

  • For a taxable income between 0 USD and 9950 USD: A tax rate of 10% is applicable.
  • For a taxable income between 9951 USD and 40,525 USD: A tax rate of 12% is applicable.
  • For a taxable income between 40,526 USD and 86,375 USD: A tax rate of 22% is applicable.
  • For a taxable income between 85,376 USD and 164,925 USD: A tax rate of 24% is applicable.
  • For a taxable income between 164,926 USD and 209,425 USD: A tax rate of 32% is applicable.
  • For a taxable income between 209,426 USD and 523,600 USD: A tax rate of 35% is applicable.
  • For a taxable income exceeding 523, 601 USD: A tax rate of 37% is applicable.

Tax Rates levied for Married Taxpayers in the US (filing jointly)

For Single Tax Payers in the United States, the following tax rates are applied:

  • For a taxable income between 0 USD and 19,000 USD: A tax rate of 10% is applicable.
  • For a taxable income between 19,901 USD and 81,050 USD: A tax rate of 12% is applicable.
  • For a taxable income between 81,051 USD and 172,750 USD: A tax rate of 22% is applicable.
  • For a taxable income between 172,751 USD and 329,850 USD: A tax rate of 24% is applicable.
  • For a taxable income between 329851 USD and 418,850 USD: A tax rate of 32% is applicable.
  • For a taxable income between 418,851 USD and 628,300 USD: A tax rate of 35% is applicable.
  • For a taxable income exceeding 628,301 USD: A tax rate of 37% is applicable.

In exception to this, there are several other personal taxes that are levied in the United States. Some of the most prominent categories of taxpayers are as follows:

Alternative Minimum Tax: The Alternative Minimum Tax (AMT) is a scheme that is in place in order to facilitate taxpayers in the way that helps them to pay minimum taxes. The individual AMT is applied at a rate of 26% and 28%. For the year 2020, a rate of 28% was applicable on taxpayers with taxable incomes higher than USD 197,900. For the tax year 2021, the 28% tax rate is applicable to taxpayers that have income greater than USD 199,900. However, it must be noted that the Alternative Minimum Tax is only payable to the extent where it exceeds the regular net tax liability.

Medicare Contribution Tax: This tax was imposed in 2013. It requires a levy of 3.8% applied as unearned income contribution in lieu of medicare. This is applied to the lesser of either the taxpayers’ net investment income for the given year, or the taxpayers gross income that is in excess of the threshold amount.

State and Local Income Tax: In addition to income taxes that are imposed by the federation, it can be seen that a lot of states, as well as municipalities impose personal state taxation on their residents. This is across all residents except for a handful.

Corporate Taxation in the United States

US tax reforms adopts a territorial system of taxation. Over the recent years, there has been a significant decline in the corporate income tax rates. The corporate income tax rate has reduced from 35% to 21%, following 2017. This was introduced via a tax reform legislation, referred to as P.L 115-97. However, there is also a difference between the resident statuses of companies.

Other Corporate Taxes

Alternative Minimum Tax: There were changes in the Alternative Minimum Tax levy that was applied as a result of P.L 115-97. The tax credits that resulted as a result of excess tax paid in the years prior to this legislation were supposed to be declared, and subsequently claimed as adjustments.

S Corporations: S Corporations are corporations with 100 or fewer eligible shareholders. However, they are not eligible to US Federal Taxes.

Gross Transportation Income Taxes: Foreign corporations as well as non-resident corporations are subject to a 4% yearly tax on their US-Sourced gross income. However, there is an exception for certain income that is treated to be connected to US Trade or businesses. Transportation income, on the other hand, is derived from the use of a given vessel or aircraft, or the performance of services directly related to the usage of the vessel.

State and Local Corporation Taxes: Corporate Income Taxes across states vary and range from 1% to 12%. In this regard, the most common taxable base is federal taxable income. This is modified by state provisions, depending on different rules and regulations that are applicable in the said area. The most common corporate income tax base in this regard is said to be the federal tax base.

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