Tax laws and rules vary from state to state. The Internal Revenue Code (IRC) Title 26 of the U.S. Code provides the foundation of federal tax law at the national level. The IRS Code also has many other important subtitles. Federal tax law covers revenues collected from personal sources such as wages or salary, real property, gifts, inheritances, charities and so on. There are also other important subsets of federal tax law such as Excise Taxes, which is levied for various reasons by the government to fund the revenue.
While state tax laws generally do not regulate individual income tax directly, state tax laws and rules do regulate taxation of wealth and estate. Generally, all the states have some provision for property tax, though the states may also tax specific assets such as yachts and boats. The tax laws and rules governing these assets are very specific, and they may vary considerably from state to state.
Individual income tax is basically the taxation of all income that a person earns, including dividends, interest and some forms of income over a specified period. Corporate tax is different from the individual income tax in many ways. It is usually called income tax and it is calculated differently from individual income tax. This tax is based on an individual’s net income from all sources, including both employment and business activities. This tax is owed by businesses and corporations to the government on behalf of their shareholders or owners.
Estate tax is another type of tax law at the national level. Estate tax is basically the tax liability on the transfer of property during the life of a person or during the lifetime of an individual. The property tax is calculated on the basis of the current value of the property. Unlike the income tax, which is computed by taking into account only income or assets, the estate tax weighs both positive and negative factors to arrive at the amount of tax liability. The U.S. Congress recently passed a tax law that will increase the estate tax revenue, but this reduction in revenue was offset by projected economic growth.
International taxation differs from customary or national tax laws in many ways. Most significantly, the rules of property and transfer of funds under international tax law are more complicated because there are several different tax codes with different rules. International tax law also imposes additional requirements on cross-border transactions, such as reporting and certification.
Some of the many variations of tax law are discussed below. Income and gift tax rates are typically high for high earning individuals and business entities. Taxation on dividends is based on the current market price of the stock and is usually twenty percent. Business owners may be able to deduct interest paid on debt loans on their income taxes. Capital gains and dividends received by a non-resident alien may be subject to the tax on foreign source incomes.
Taxation of intangible assets is complex and includes several exceptions, most of which are listed below. Taxation of bank deposits, retirement plan contributions, paid-in capital, and Railroad Retirement Income Security Act (RNSA) annuities are governed by tax law rules. Taxation of interest paid on student loans is decided on a case by case basis and depends on the taxpayer’s residence and status. Income or gain on sale of certain tax-free estates is subject to specified conditions, including the taxpayer’s awareness and acceptance.
Taxpayers should consult a tax lawyer for assistance with questions about the various tax laws. An attorney can explain the complex rules of tax law and help clients evaluate their compliance. Taxpayers should understand all the deductions and credits available to them, and learn which tax credits are most important to them. When taxpayers become confused about the tax laws, they should seek qualified tax advice. Taxpayers can also file an income tax return for free with the IRS if they so desire.