Introduction to Taxes

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What are taxes?

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Taxes are mandatory payments made by individuals and businesses to governments, serving as the primary source of income for governments.

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Why are taxes important?

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Taxes fund essential services and infrastructure, making them available to everyone, and are considered a civic duty.

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What do taxes pay for?

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Taxes fund public education, healthcare, public safety, infrastructure, social services, national defense, and research and development.

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What are the three primary categories of taxes?

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Taxes on what you earn, taxes on what you buy, and taxes on what you own.

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What is income tax?

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Income tax is a tax imposed on the income generated by an individual or business, divided into federal, state, and local income tax.

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What is FICA?

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FICA, or the Federal Insurance Contributions Act, funds Social Security and Medicare, with a combined tax rate of 7.65% for employees.

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What is the Federal Unemployment Tax Act (FUTA)?

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FUTA is a federal program providing temporary financial assistance to unemployed workers, imposed only on employers.

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What is sales tax?

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Sales tax is a consumption tax paid by the end consumer of goods and services, collected by the seller at the point of sale.

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What is property tax?

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Property tax is a tax imposed on real estate or other forms of property, calculated based on the property's value.

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What are estate and inheritance taxes?

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Estate taxes are paid by the estate before distribution to heirs, while inheritance taxes are imposed on assets received by heirs.