Depending on your cash income, there is a corresponding amount that you must give in taxes to the government. It is also vital for you to have a basic knowledge of the taxes that you need to cover once payday arrives. Here are the basic taxes to be paid when your cash income arrives.
- Property tax. This is the tax that you pay for the real estate, buildings, houses and other infrastructures which you own. This is appraised by personnel from the local governments, who will determine your property value. Property tax includes not only the infrastructures, but also the land where the buildings stand on. This means that a small house that is built on a large expanse of land can still receive a sizable tax deduction. In general, there are three types of property tax. The first is the land tax, which refers to the actual lot which you own. The second is termed as ‘Improvements to Land,’ and refers to the various immovable infrastructures and buildings. The third type of property tax is the Personal property tax, which refers to goods that are not fixed permanently on the land. This includes cars, and other personal belongings.
- Estate Tax. This is the tax that you pay for the taxable estate of a deceased relative. Its value is set as the estate’s gross price without the allowable deductions. This tax, however, does not apply when the assets are transferred to a surviving relative, sibling, child or spouse. In that case, it is called the “marital deduction.”
- Alternative Minimum Tax (AMT). This is the tax that is normally added to the primary taxes that you pay. It is calculated through your adjusted gross income. If your liabilities for a year are less than your AMT, you must pay your regular tax plus the amount of AMT which exceeds your regular tax. The alternative minimum tax is created to ensure the equal taxation of all income earning individuals. The AMT was created as a response to past tax rules where wealthier individuals made use of loopholes in the tax system to allow them to earn big without paying taxes. The AMT works as separate tax system, computed differently from the regular taxes that are collected from you.
- Self-employment Tax. This is the tax that you will pay if you are self-employed. One of the problems which self-employed individuals face is the lack of social security services that companies usually offer for their employees. Through the self-employment tax, you can enjoy the privileges of Social Security which your government provides once you officially retire from work. This tax may decrease if you already applied for Social Security Services and Medicare taxes from another employer.
Paying income taxes can be annoying. Keep in mind, however, that these tax deductions are used to ensure that the infrastructure and basic services that you and your community needs are available. Taxes are also your ticket to a comfortable retirement – with social security and medical services.