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What to Know About Personal Income Tax

Personal Income Tax

Personal income taxes are a tax levied on the income of individuals that have residence in the United States, or those that work in the country. In addition to federal income tax, most states also levy a personal income tax. There are actually several states that do not tax personal income in any way. There are currently seven states that have no personal income tax. There are also a few states that tax only certain income, such a interest income. Those states generally make a majority of their money from sales tax on items sold in, or from that state.

Personal income tax is assessed on the total income of each tax payer. For some taxpayers that are married, they may find their tax responsibility lowered by filing as married, filing singly. For other couples, the biggest tax breaks are found by filing as married filing jointly. The amount of personal income taxes is determined after taking all allowable deductions. Allowable deductions will vary for each individual. Tax laws change frequently, and are different in each state. Many taxpayers chose to have an accountant file their taxes so that they can be sure that do not miss out on any allowable deductions for their personal income tax.

Taxpayers that miss deductions, often miss out on tax refunds that can include large amounts of cash. Most people have money taken out of their employment checks, in order to make payments towards their estimated personal income taxes. Some tax payers find that they owe addition money towards their personal income taxes at the end of the year, while others will find that they get a refund on taxes that they have paid.

Some states impose a flat rate personal income tax, while others include confusing calculations in order for taxpayers to figure out what their personal income tax amount will be. Generally, in states that have differing personal income tax rates, the wealthy are taxed at a higher rate than the middle and lower classes. In other words, those that make a salary over a certain amount, end up paying the highest percentage of their income to state personal income taxes.

Personal income taxes are generally paid on a federal level and a state level. Each tax payer will find that different rules and tax laws apply to their specific situation. Personal income consists of monies earned form a variety for resources. The total amount of allowable deductions, subtracted form an individuals total income, results in their total personal income tax responsibility. Personal income taxes are important and should receive careful attention by each tax payer.

NEXT: What to Know About Tax Exemptions

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