You may be surprised that there are many different types of taxes. That’s right, Uncle Sam is always finding new ways to get more of everyone’s money. Therefore, it is a good idea to learn about all the ways that you can be taxed. With a partner like MBA Financial & Accounting Solutions, you will be able to stay on top of your taxes year in and year out. After you finish reading this article, make sure to set your tax appointment with MBA Financial & Accounting Solutions. Call us at 800-576-5746 for our availability. Here we will take a look at the three main ways that you are taxed and the types of taxes that you may encounter.
The Three Ways that You Can Be Taxed
Chances are that you pay taxes every day and do not really know it. That’s because there are three ways that you can be taxed:
What you earn
The most obvious way that you are taxed is through what you earn. For instance, when you work, you will notice that you have various taxes taken out of your paycheck. These are taxes on what you have earned. Also, if you make money with your investments, you will likely pay a capital gains tax.
What you spend
You are also taxed when you spend money. For instance, when you may make a purchase, you will pay a sales tax. In certain countries, people will also pay what is known as a value-added tax or a VAT.
What you own
Finally, you can be taxed on what you own. For instance, if you own property, then you will pay a property tax. Also, when you drive a motor vehicle, you will pay annual taxes to your state Department of Motor Vehicles.
Types of Taxes
Not that you know the three different ways that you can be taxed, let’s take a look at the more specific taxes that are available:
Individual taxes are taxes that are paid by individual workers or people who are self-employed. If you have ever earned an income above a certain level, then you will have ended up paying individual taxes.
A corporation will also pay taxes on its earnings. Basically, a corporate tax can range in size from trillion-dollar companies like Apple to one-person businesses that operate out of a home.
Payroll taxes are taxes paid by both individual workers and corporations to help pay for social programs such as Social Security and Medicare. The combined tax rate for both programs is 15.3%. Half of the tax is paid by the employee while the other half is paid by the employer. Self-employed individuals pay the full 15.3% tax.
Capital Gains Taxes
Capital gains taxes are taxes that are paid for any profit generated from an investment. For instance, if you make money investing in the stock market, then you will likely pay either short-term or long-term capital gains taxes.
Sales taxes are taxes that are paid when someone purchases a good or service. Sales taxes are placed on the local or the state level. For instance, if you buy a candy bar and a soda from your local convenience store, then you will pay a tax for that purchase.
Gross Receipt Taxes
Gross receipt taxes are taxes that are paid by a company’s gross sales, regardless of profitability and without taking account of any of their business expenses.
Value-added taxes (VAT) are taxes that are paid at each stage of consumption of a product. However, the manufacturer is able to deduct the taxes from each stage, passing the VAT ultimately to the end-user – the customer.
An excise tax is a tax that is placed on a specific good or service. Examples of an excise tax include taxes on cigarettes, alcohol, gas, and betting.
Property taxes are taxes that you pay on property that you own. For instance, if you own a home, then you will pay an annual tax to the county government where the property is located.
Inheritance & Estate Tax
An inheritance & estate tax is the taxes that an estate has to pay at the time of a person’s death. These taxes are paid before the inheritance or estate is passed onto the heirs.
A wealth tax is a tax that is incurred to individuals who have an income that exceeds a certain threshold. For instance, someone who earns $3 million in a year will be imposed a wealth tax on all income over $1 million.
It is important to understand all the taxes that exist around you. This is because you will need to factor in the cost of taxes whenever you earn, spend or own something. Be sure to consider the tax implications of any financial transaction that you make. Being more tax-savvy will help you get the most out of your money. If you still need help understanding your taxes, make sure to contact the team at MBA Financial & Accounting Solutions. We are here to help you understand what taxes you are paying and not paying for. Set your appointment with us by calling 800-576-5746 today!