What Is Income Tax? How To Pay It In USA?

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Income Tax

It is known to all that the US government levies tax upon individual and business incomes to generate revenue. The government uses the collected tax to finance different welfare projects, including social security and health.

The tax rates have remained unchanged for the year 2022. However, it changes every year due to inflation. US citizens are liable to pay their income taxes.  

But how do they determine the tax brackets? And how to pay the tax? If you are struggling to find answers to these questions, this article should help you. Here is a detailed explanation of how income tax works in the US. But,

What Is Income Tax?

What Is Income Tax?

The US federal government levies taxes upon income generated by businesses under their jurisdiction. As per law, taxpayers have to file an income tax return at the end of the year and evaluate their tax obligations.

They are a great source of annual government revenue. The revenue generated by the collected tax funds different government projects, pay for public services and helps pay government obligations. Other types of taxes fall under taxable incomes. For example 

  • Individual income taxes
  • Corporate income taxes 
  • Payroll taxes 
  • Capital gain taxes

State Income Tax 

Aside from the federal income tax, US citizens are also liable to pay state income taxes in some states. In addition, even some local governments also levy income taxes on community members.

However, specific states in the US do not levy any state income tax on citizens. For example –South Dakota, Nevada, Tennessee, Alaska, Florida, Texas, Washington, and Wyoming are such states that do not impose any tax upon the inhabitants. Also, earned wages don’t get taxed in New Hampshire.

However, incomes earned from interests and dividends get taxed in the earnings. But, New Hampshire is planning to make all incomes tax-free by the end of 2027.

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How Does Income Tax Work?

The federal government income tax is determined by an individual’s income and filing status, and the tax rates vary according to the income generated by an individual or a business.  

The federal government has seven different income tax brackets as of 2022. These seven rates range between 10%, 12%, 22%, 24%, 32%, 35%, and 37%. But how to determine the minimum income to file income taxes? If you are under the age of 65 and earn $12,550, you are liable to pay income tax. 

The top marginal tax rate is 37%. But it does not mean that you have to pay a whopping 37% in taxes for your entire income. It is only the top marginal tax rate. Here is how tax is imposed upon the earning individuals.

How Does Marginal Income Tax Rate Work? 

A certain amount of income determines the marginal income tax rate. If you earn an amount to be levied 37% tax, then this tax will not apply to your entire income. So, what is the minimum income to file taxes in 2022? By law, all US incomes between $0 and $10,275 are subjected to a 10% tax on taxable incomes. 

If you earn $11280, then you are liable to pay a 10% tax on $10,275. The rest ($1005) will fall under the 12% tax bracket. This will go on successively for each margin of income. Here is a list to help you understand –

Federal Income Tax Bracket Example

Single Filing Head of Household Married, Joint FilingMarried Separate Filling 
10%$0 – $10,275$0 – $10,275$0 – $20,550$0 – $10,275
12%$10,276 – $41,775$10,276 – $41,775$20,551 – $83,550$10,276 – $41,775
22%$41,776 – $89,075$41,776 – $89,075$83,551 – $178,150$41,776 – $89,075
24%$89,076 – $170,050$89,076 – $170,050$178,151 – $340,100$89,076 – $170,050
32%$170,051 – $215,950$170,051 – $215,950$340,101 – $431,900$170,051 – $215,950
35%$215,951 – $539,900$215,951 – $539,900$431,901 – $647,850$215,951 – $323,925
37%$539,901+$539,901+$647,851+$323,926+

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How To Pay Income Tax In The US?

How To Pay Income Tax In The US?

You can pay for your taxable income in different ways. Here are some ways that I have shown –

  • Electronic funds withdrawal. You can pay through your bank account at the time of e-filing your return. 
  • You can also directly pay your taxes through a savings or checking account. 
  • Income tax is payable through debit or credit cards. 
  • You can also pay online using your mobile phone.
  • Income tax is also payable through cash and installment agreements.

Frequently Asked Questions (FAQ):

I think you will find these questions and answers helpful–

Q1. Do US Citizens Have To Pay Taxes Outside The US?

Even as a resident alien living outside the country, a US citizen is liable to pay their share of income tax. A worldwide income falls under taxable income under the laws of the US government. This is payable regardless of where you are currently living. 

Q2. What Is The Minimum Salary To Pay Income Tax In The USA?

The minimum taxable salary of a US citizen depends upon the age and the status of the citizen. The minimum salary for a single filer in the US rests at $12550, and the age for filing tax should be under 65. However, US citizens earning below $12550 do not need to file income tax. 

Q3. Why Should You Pay Income Tax In The US?

By law, US citizen earning above the taxable income threshold is liable to pay income taxes. The federal government of the US collects this tax to finance different social projects and public welfare projects. Unless the citizens pay the tax, the government cannot finance these different projects.

Bottom Line

The income tax that the federal government levies do not depend upon the location of the taxpayers’ inhabitance. They are liable to pay the tax irrespective of where they live if they earn above the income threshold mentioned by the US tax system. However, some states and localities charge citizens with state income taxes. I have also detailed those portions. 

I hope that you found this article helpful. If you have any further queries, reach out to us in the comment sections. We love to keep in touch. Thank you.

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Shahnawaz is a passionate and professional Content writer. He loves to read, write, draw and share his knowledge in different niches like Technology, Cryptocurrency, Travel,Social Media, Social Media Marketing, and Healthcare.

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