Unfortunately, taxes are part of life. We all benefit from the government in some ways, even if it is only the security that comes from the military and the police. Thus, taxes are necessary to pay for it. Here are nine taxes that one way or another affect your finances.
1. Income tax.
The income tax everyone is familiar with. It is also the one that it is easiest to see how it affects your finances. If you are an employee of a business, then you see it every time you get paid. Take one look at your pay stub, and you know how much was taken out of your check for the income tax. While the income tax is an excellent revenue generator, it is also expensive to administer and comply with. This is why there is an entire industry dedicated to helping people with their income tax returns.
2. Social security tax.
Social security tax is used to pay the benefits of those receiving Social Security. It is the one tax that we pay for which the government promises that we will be repaid later in life. The one issue with this program is deriving sufficient revenue from the tax to pay the benefits. Like the income tax, the Social Security tax is taken out of your paycheck making it painless, that is unless you are self-employed. If you are self-employed, you pay what is called the self-employment tax, that is your social security tax.
3. Medicare tax.
The Medicare tax is the tax on wages and tips to help fund Medicare which is a form of government medical insurance for senior citizens. Like income tax and social security tax, this tax is taken out of your paycheck. Also, like Social Security, there is the promised benefit later in life, but it is only for healthcare. The tax was extended to include some investment income by “The Affordable Care Act,” but your income must exceed $200,000 for this tax to apply investments. Even if you have no investment income, this is still money out of your paycheck.
4. Sales tax.
A sales tax is a little extra that you pay when you buy something. They are usually on all retail sales. Sales taxes are one of the least painful taxes we pay because while we see it, it is usually a small amount adding up to only a few dollars on a hundred. As a result, you have to be spending a lot before it is noticeable. It also has the advantage of being completely voluntary. After all, if you do not buy anything but save your money, you do not pay any sales tax. It is a tax you have complete control over.
5. Excise tax.
Excise taxes are like sales taxes in that they are paid when we purchase something. However, an excise tax is levied against a particular product. There are two main reasons for excise taxes are placed on a particular item. The first is that it is an indispensable item such as gasoline. The second is that it is an item did the government wishes to control such as tobacco. For both, the government gets revenue at each transaction but when an excise tax before control its purpose is to raise the price.
6. Vehicle Tax.
A vehicle tax is levied on a vehicle that will be used on public roads. These taxes are mainly for the purpose the maintaining roads and highways. Unlike a property tax if you do not intend to use the vehicle the public roads you do not need to pay it. Payment of the tax on a vehicle is usually a prior condition to getting a license plate for being able to use it on public roads. While this tax is avoidable by not using your own vehicle, it will affect your finances if you need a one.
7. Property tax.
A property tax is a tax on one’s real estate or other property. Even if you rent property taxes will affect your finances because it will affect how much you pay in rent. If you own property, it is usually a tax that is paid once a year and is based on the value of the property. Failure to pay property taxes can result in forfeiture of that property which is another effect property taxes can have on your financial health. Part of the idea behind property taxes is that landowners have a vested interest in the area.
A tariff is a tax on the import and exports a good into a country. This is one tax that you do not see but still affects your finances because it affects the prices that you pay for various items. This is one reason some imports are they expensive as they are. Tariffs are a good source of revenue for a country, and they can be used to protect local goods against unfair competition. This can also help your finances but not forcing you to compete we foreigners that make less money.
9. Capital gains tax.
A capital gains tax is a tax paid are the profits from capital investments. These include stocks, bonds, a real estate. While most people do not have to deal with capital gains tax on a regular basis, there are circumstances where you may be affected. If you inherit stocks or real estate and sell it, you will have to pay a capital gains tax on any increase in value since the person’s death. This is also true if you buy a home and sell it without buying a new one. You do not pay a capital gains tax if the profits are reinvested.
Unfortunately, taxes are something you need to consider in your finances. However, they are a necessary part of civilization since governments do need money to operate. These taxes will affect your finances, but they will only cause significant problems under unusual circumstances.