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What Taxes Do You Pay?
It is a few weeks from the Presidential election and word parsing in the public domain is in full swing. The New York Times just released a report on fifteen years of President Trump’s income tax returns and he paid very little income tax or no income tax for most of those 15 years. Representatives for President Trump responded right away saying that he paid plenty of personal taxes. Let us review the different taxes most people pay.
The most common tax that all of us pay in the United States is sales tax. You go the store and purchase an item and pay the cashier the sticker price and, in our area, an eight percent sales tax. That sales tax collected is split between and forwarded to the state and county where the purchase was made. Food purchased at the grocery store is exempt from sales tax, but prepared food purchased at a restaurant is subject to sales tax. Another common purchase is clothing on which we pay sales tax, unless there is a back-to-school program to exempt a certain dollar amount of those purchases.
Own a home or other real property? If you do, it is assessed a value and assigned a real property tax. Generally, you pay county and town or city property tax in January, village taxes in May and school property tax in September.
If you are employed and earning a wage, you will pay 7.65% of your wages in FICA Social Security and Medicare taxes. Check your pay stub. Your employer will forward those taxes withheld from your paycheck and pay an additional equal amount to the federal government on your behalf. If you are self-employed you will pay approximately fifteen percent in self-employment taxes on your self-employment net income. Both the FICA taxes and the self-employment tax paid are meant to fund the social security income and medicare benefits you will receive in retirement.
Finally, we have the dreaded income tax. Our Form 1040 and IT-201, filed with the federal and state government by April 15, totals our income and subtracts our deductions to come up with a taxable income and computed income tax. Then our tax credits, income taxes withheld and any estimated tax payments we made during the year are applied against our computed income tax liability. Hopefully, we have a tax refund or very little tax due. Partnerships and corporations file their own income tax returns.
Each year we pay sales tax, real property tax, FICA social security and medicare taxes on our wages and, lastly, federal and state income taxes. The term “personal taxes” can mean any or all of these taxes.
Enjoy our extraordinary fall colors this year and make sure to exercise your right to vote!