Tis the season to be taxed!
With tax season here, I decided that I should review the different types of taxes. Taxes are something that are a part of our everyday lives so I think it is important to know the different types. These are not all of the types of taxes, but common ones.
Let’s start with the basics.
What are taxes:
Our taxes are money given to the federal, local, and state governments so that they can pay for different services like the highways, police, debt, and more. Yes, we do indeed pay for that. “The U.S. government has collected $1.58 trillion in fiscal year 2024” (https://fiscaldata.treasury.gov/). That means that our taxes have contributed to this amount of money to the government. This is 112 billion dollars more than the last fiscal year. That is insane.
Before I could vote, I would always wonder why people were so passionate about voting for a president who would lower taxes. Now that I am older, I understand why people care about taxes so much. They are a part of everything. Every time you buy something? Most likely taxed. Every time you get a check from work? Most likely taxed. Your residence? Most likely taxed. Paying taxes is something that we have to do. It is a constitutional right for the government to tax us. Knowing that taxes are in our everyday lives, here are some important ones to know about.
Income taxes:
This is the amount of money that comes out of your income. It is based on your ability to pay. The more money you make, the more you get taxed. That is why there are different tax brackets. Below is an income tax calculator. Not all states have income tax including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. Washington and New Hampshire also do not have income taxes depending on certain circumstances.
https://smartasset.com/taxes/income-taxes#roW6OWyQJd
Once your income is taxed, you can then go shopping and buy whatever else you want tax-free! Wait…
Sales taxes:
A tax is included on everything you buy. The amount that you are taxed varies based on location. Next time you get a receipt, you will see the amount of money you paid in taxes near the bottom. Most businesses charge sales tax on the products they sell. It is important to note that not all states have a sales tax including Alaska, Delaware, Montana, New Hampshire, and Oregon. Some states without a sales tax may have alternative forms of taxation to generate revenue.
Payroll taxes:
These are not to be confused with income taxes because these taxes go to your social security, medicare funds, and unemployment insurance rather than the general government fund. Employers take it out of the employee’s check and send it to the government. The employer and employee typically share the burden of payroll taxes.
Property taxes:
These are taxes that you pay based on the property you own. If you rent your residence, you may still pay these taxes to the owner through fees. This funding usually pays for schools, public safety, and other community services. Some people can get deductions on their property taxes on factors such as age, disability, or veteran status.
Overall, taxes are a part of our lives someway, somehow. We should be educated about where our money is going and why the government has the right to tax us.
Happy Learning!
