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Frequently Asked Questions

How does US federal income tax work?

The US has a progressive federal income tax system with seven brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Taxable income is calculated as total income minus adjustments, deductions (standard or itemized), and exemptions (suspended for 2018-2025).

What are the 2024 US tax brackets?

For 2024: 10% ($0-$11,600 single), 12% ($11,601-$47,150), 22% ($47,151-$100,525), 24% ($100,526-$191,950), 32% ($191,951-$243,725), 35% ($243,726-$609,350), 37% ($609,351+). Married filing jointly: double the single brackets up to $609,350, then 37% on income above $731,200.

What is the standard deduction for 2024?

2024 standard deduction: Single $14,600, Married Filing Jointly $29,200, Head of Household $21,900. Additional for 65+/blind: $1,550 (single/HoH), $1,250 per spouse (MFJ). These amounts are adjusted annually for inflation.

What is the difference between standard and itemized deductions?

Standard deduction: a fixed amount based on filing status. Itemized deductions: actual expenses (mortgage interest, state/local taxes up to $10K, charitable contributions, medical expenses over 7.5% of AGI). You choose whichever is higher.

How is Social Security taxed in the US?

Social Security tax: 6.2% employee (12.4% self-employed) on wages up to $168,600 (2024). Medicare tax: 1.45% employee (2.9% self-employed) on all wages. Additional Medicare Tax: 0.9% on wages over $200K/$250K.

What is the US capital gains tax rate?

Long-term capital gains (assets held >1 year): 0% for income up to $47,025 (single), 15% up to $518,900, 20% above. Short-term gains (held =1 year): taxed as ordinary income (up to 37%). An additional 3.8% NIIT applies above $200K/$250K MAGI.

What is the US corporate tax rate?

C Corporations: flat 21% federal corporate income tax (TCJA 2017). S Corporations: pass-through taxation at individual rates. State corporate tax rates: 0-11.5%. Effective rate for C Corps: typically 25-30% including state taxes.

What are common US tax deductions?

Common deductions: mortgage interest (up to $750K principal), state/local taxes ($10K limit), charitable contributions (up to 60% of AGI), medical expenses (over 7.5% of AGI), student loan interest ($2,500 max), IRA contributions ($7,000 max), HSA contributions ($4,150/$8,300).

What are common US tax credits?

Common credits: Child Tax Credit ($2,000/child), Earned Income Tax Credit (up to $7,830), American Opportunity Credit ($2,500/student), Lifetime Learning Credit ($2,000/tax return), Child Care Credit, Saver's Credit, Energy Credits, Premium Tax Credit.

What is filing status in the US?

Five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household (unmarried with dependent, pays >50% of household costs), and Qualifying Surviving Spouse (2 years after spouse's death with dependent child). Status determines tax rates and standard deduction.

What is the Alternative Minimum Tax?

AMT is a parallel tax system that recalculates tax with certain preferences and adjustments, limiting deductions. For 2024, the AMT exemption is $85,700 (single) / $133,300 (MFJ), phasing out at higher incomes. AMT rates are 26% and 28%.

What is the Net Investment Income Tax?

NIIT is a 3.8% surtax on the lesser of net investment income or MAGI exceeding $200,000 (single) / $250,000 (MFJ). Investment income includes interest, dividends, capital gains, rental income, royalties, and passive business income.

How does the US tax foreign income?

US citizens and residents are taxed on worldwide income. The Foreign Earned Income Exclusion ($126,500 for 2024) excludes foreign earned income up to the limit. The Foreign Tax Credit offsets foreign taxes paid against US tax liability. FBAR and FATCA reporting requirements apply.

What is the US estate tax?

Federal estate tax applies to estates over $13.61 million (2024) at rates up to 40%. Portability allows spouses to use unused exemption. State estate taxes apply in 12 states and DC with lower thresholds. Gifts over $18,000/year per person count against the lifetime exemption.

What is the self-employment tax in the US?

Self-employment tax: 15.3% (12.4% Social Security + 2.9% Medicare) on 92.35% of net earnings up to $168,600 for SS, plus 2.9% Medicare on all earnings. Additional 0.9% Medicare over $200K/$250K. Half of SE tax is deductible as an adjustment to income.

How does the US tax retirement accounts?

Traditional IRAs/401(k)s: contributions may be deductible, withdrawals taxed as ordinary income. Roth IRAs/401(k)s: contributions after-tax, qualified withdrawals tax-free. RMDs start at 73. Early withdrawals (before 59�) incur 10% penalty (exceptions apply).

What are estimated taxes in the US?

Quarterly estimated tax payments (Form 1040-ES) are required if you expect to owe $1,000+ after withholding. Due April 15, June 15, September 15, January 15. Safe harbor: pay at least 90% of current year or 100%/110% of prior year tax to avoid penalties.

What is the US tax filing deadline?

Federal tax returns are due April 15 (individuals). Automatic 6-month extension available (Form 4868), but payment is still due April 15. Corporate returns: March 15 (S Corps) or April 15 (C Corps). Extensions available. Late filing penalties: 5% per month up to 25%.

What is the Form W-4 and withholding?

Form W-4 tells employers how much federal tax to withhold. The 2020 redesign uses a 5-step process: personal info, multiple jobs, dependents, other income/deductions, extra withholding. Adjust when your tax situation changes. Withholding is reconciled on your tax return.

What is the difference between a tax deduction and a tax credit?

Deduction: reduces taxable income, saving tax at your marginal rate. Example: $1,000 deduction at 22% saves $220. Credit: reduces tax dollar-for-dollar. Example: $1,000 credit saves $1,000. Credits are generally more valuable than deductions.

What is the US tax on dividends?

Qualified dividends: taxed at long-term capital gains rates (0%, 15%, 20%) if holding period met. Non-qualified dividends: taxed as ordinary income (up to 37%). Both subject to 3.8% NIIT if income exceeds thresholds.

How does the US tax Social Security benefits?

Up to 85% of Social Security benefits are taxable based on combined income (AGI + nontaxable interest + � SS benefits). Single: 0% if <$25K, up to 50% if $25K-$34K, up to 85% if >$34K. Married: thresholds are $32K and $44K.

What is the US health insurance tax requirement?

The individual mandate penalty was reduced to $0 starting 2019 (TCJA). No federal penalty for being uninsured. However, premium tax credits are available for Marketplace coverage. Some states (CA, MA, NJ, RI, DC) have their own individual mandates with penalties.

What are the US tax implications of marriage?

Marriage affects filing status, tax brackets (MFJ has roughly double single brackets), standard deduction ($29,200 vs $14,600), phaseout thresholds for credits, and potential marriage penalty/bonus depending on income split.

What is the US tax on gambling winnings?

Gambling winnings are fully taxable as ordinary income. Losses are deductible up to winnings (itemized deduction). W-2G issued for $1,200+ slot/kennel, $1,500+ keno, $5,000+ poker, $600+ other (and 300:1 odds). Withholding: 24% for certain winnings over $5,000.

How do I file US taxes?

Options: tax software (TurboTax, H&R Block, TaxSlayer, FreeTaxUSA), professional tax preparer (CPA, EA), IRS Free File (AGI under $79,000), or paper forms. E-file is recommended for faster processing. Forms: 1040 (individual), 1120 (corporation), 1065 (partnership).

What is the US tax on cryptocurrency?

Cryptocurrency is treated as property for tax purposes. Selling, trading, spending, or mining crypto creates taxable events. Capital gains/losses apply (short or long-term depending on holding period). Mining income is ordinary income at FMV when received.