FINANCE & LIFESTYLE
Federal & State Income Tax – Know the difference
Carlos Padron, Finance, Dallas, TX
12 September, 2018
Avoid tax penalties when filing your return. A majority of taxpayers that move to a different state aren’t fully aware of its state’s tax laws and how it can affect an individual living there. Adapting to these changes can be tedious but it will decrease the likely hood that you’ll get penalized for not paying taxes for certain items including income.
Depending on where you live, the diverse tax laws vary across different states. Almost the majority of individuals pay federal income tax. However you may only need to pay federa income tax too. There are only seven states in which state tax is not required pay State Income Tax including Texas.
States like Pennsylvania offer fixed income tax; meaning the rate rate doesn’t change for its residents
Federal Income Taxes in its simplist form is a tax that is imposed based on the amount of money an individual makes every year. The bigger amount a person’s income is, the bigger amount of tax is imposed. From low income earners to high income earners, there are 5 brackets in which you can determine how much you owe. Low income earners pay about 10% income federal tax and high income earners can pay up to a 37% federal tax on income earned. However being smart in your investments can help lower the tax.
8 States pay fixed Income Tax with 33 states paying personal Income Tax that isn’t fixed
State Income Tax however is another tax imposed by the IRS. Both are based off the money one makes but State Income tax is another entity. In addition to filing a Federal Tax you will also need to file a State Income Tax. In simple terms, if an individual files taxes on it’s house in its home state but has wages and income earned from another state. This in which would require you to fill file State Income Tax The due date however still falls on the same day on April 15.
Knowing where you live really makes a difference in how much you will pay in taxes regardless of how much income one makes throughout the year. Making smart, mindful investments, can help lower one’s taxes and make a difference in the amount of spending one will have to make.
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