Personal income taxes paid by Americans constitute over 50% of the total tax revenue for the government. Interestingly, the share of corporate taxes is fairly small (approximately 10%). About a third of the tax revenue comes from payroll taxes (Social Security and Medicare taxes) and the remaining comes from Excise, Estate and gift taxes. An employed person is responsible to pay both ordinary income tax and payroll taxes. Both these taxes are collected by IRS (Internal Revenue Services) on behalf of federal government. In addition to federal taxes, most states have their own taxes. The city or town you live in has its own local taxes. Since a large portion of individual earnings get spent on taxes, tax planning is a very important aspect of personal financial planning. The idea is not to avoid the taxes but to plan financial activities in such a way that they do not cause undue tax consequences. The overall objective is to pay the lowest tax legally permissible both in present as well as in future.

This section covers various aspects of personal taxes. They include different factors involved in the tax calculation, AMT, tax issues related home sale, etc. To do an effective tax planning, one needs to have a good handle on various incomes and their sources, residential/rental property information, details of all expenses, prior income tax returns etc. However, the complexity and the extent of the tax code demands one to hire a tax consultant to determine the most efficient tax strategy.

Have a question