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- The government collects income tax on individuals and businesses based on earnings.\u00a0<\/li>\n\n\n\n
- Taxpayers have options like e-filing through IRS-approved software, using a tax preparation service, or mailing a paper return. E-filing is recommended for its speed and convenience.<\/li>\n\n\n\n
- Different states have varying tax structures, including progressive, flat, and no income taxes.\u00a0<\/li>\n\n\n\n
- The deadline to file a federal tax return for the tax year 2023 is April 15, 2024.<\/li>\n\n\n\n
- While extensions can be granted for filing tax returns, taxes owed must still be paid by the original deadline to avoid interest and penalties.<\/li>\n<\/ul>\n\n\n\n
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\n\n\n\nContents:<\/b><\/h2><\/p>\n\t
1. What is income tax?<\/a><\/p>\n
- \n\t
- Who is collecting the money from tax?<\/a><\/li>\n\t
- How does income tax work?<\/a><\/li>\n<\/ul>\n\t
2. Types of income taxes<\/a><\/p>\n
- \n\t
- State income taxes<\/a><\/li>\n\t
- Business or individual income tax<\/a><\/li>\n\t
- Local income taxes<\/a><\/li>\n<\/ul>\n\t
3. Income tax filing deadlines<\/a><\/p>\n
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- Tax deadlines and dates for the tax year 2023<\/a><\/li>\n<\/ul>\n\t
4. Federal tax: Tax brackets 2023 vs 2024<\/a><\/p>\n
- \n\t
- 2023 tax brackets and rates<\/a><\/li>\n\t
- 2024 tax brackets and rates<\/a><\/li>\n<\/ul>\n\t
5. Income tax return: Prepare in 5 steps<\/a><\/p>\n\t
6. FAQs<\/a><\/p>\n\n\n\n
What is income tax?<\/strong><\/span><\/h2>\n\n\n\n
Income tax is the tax that governments collect from the businesses\u2019 and individuals\u2019 money earned throughout the year. The amount of tax is determined by how much money the business or individual makes. <\/p>\n\n\n\n
The U.S. has a progressive tax system, which means that:<\/p>\n\n\n\n
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- The government decides how much tax you owe by dividing your taxable income into tax brackets, and each gets taxed at the corresponding tax rate.\u00a0<\/li>\n\n\n\n
- The higher your taxable income, the more income tax you’ll pay.<\/li>\n<\/ol>\n\n\n\n
Who is collecting the money from tax? <\/strong><\/span><\/h3>\n\n\n\n
Income tax is typically collected by a governmental agency or department tasked with tax administration. This entity’s specific name and structure vary by country, but it\u2019s commonly referred to as the Tax Authority or Revenue Service.<\/p>\n\n\n\n
In the U.S., the Internal Revenue Service (IRS)<\/strong> is responsible for collecting taxes and enforcing tax laws. The collected money is used to fund public services such as education, transportation, medical research, etc. <\/p>\n\n\n\n
How does income tax work?<\/strong><\/span><\/h3>\n\n\n\n
Your tax rate (the % of your income that you pay in taxes<\/em>) is based on which income tax bracket you\u2019re in. <\/p>\n\n\n\n
\ud83d\udccc <\/em>Note:<\/em><\/strong> The U.S. income tax rates are <\/em>marginal<\/em><\/a>, meaning each tax rate applies to only one part of your income. <\/em><\/p>\n\n\n\n
Income tax calculations are reflected in the business tax return<\/strong>\u2014a form filed with a tax authority that reports income, expenses, and other pertinent tax information. In the U.S., the IRS or local tax agencies play the role of such authority. Companies should usually file their tax return with income information annually.<\/p>\n\n\n\n
Taxpayers file the returns by filling in special forms. Generally, there are three sections: <\/p>\n\n\n\n
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- general information;<\/li>\n\n\n\n
- income;<\/li>\n\n\n\n
- deductions\/tax credits.<\/li>\n<\/ul>\n\n\n\n
\u2192 Learn more about the <\/em>IRS 720 Form<\/em><\/a>.<\/em><\/p>\n\n\n\n
Standard deduction updates for tax year 2024<\/strong><\/h4>\n\n\n\n
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- For married couples filing jointly, <\/strong>the standard deduction rises to $29,200 for 2024 (an increase of $1,500 from tax year 2023).\u00a0<\/li>\n\n\n\n
- For single taxpayers<\/strong> and married individuals filing separately, <\/strong>the <\/strong>standard deduction rises to $14,600 for 2024 (an increase of $750 from 2023).\u00a0<\/li>\n\n\n\n
- For heads of households,<\/strong> the standard deduction rises to $21,900 for the tax year 2024 (an increase of $1,100 from the tax year 2023).<\/li>\n<\/ul>\n\n\n\n
\u2192 Check our <\/em>deductions checklist for business owners<\/em><\/a> for more details. <\/em><\/p>\n\n\n\n
Types of income taxes<\/strong><\/span><\/h2>\n\n\n\n
There are three primary types: <\/p>\n\n\n\n
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- State income tax;<\/li>\n\n\n\n
- Business income tax;<\/li>\n\n\n\n
- Local income tax.\u00a0<\/li>\n<\/ul>\n\n\n\n
Let\u2019s take a closer look at each type of tax individually to help you understand them better in the future!<\/p>\n\n\n\n
<\/p>\n\n\n
\n![\"Types](\"https:\/\/synder.com\/blog\/wp-content\/uploads\/sites\/5\/2024\/03\/types-of-income-taxes.png\")
<\/figure><\/div>\n\n\n<\/p>\n\n\n\n
State income taxes<\/strong><\/span><\/h3>\n\n\n\n
State income taxes are imposed by individual states on the income earned by residents and sometimes by non-residents who earn income within the state’s borders<\/strong>. <\/p>\n\n\n\n
\ud83d\udccc Note:<\/em><\/strong> State income taxes are separate from federal income taxes.<\/em><\/p>\n\n\n\n
All states fall into one of three different categories:<\/p>\n\n\n\n
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- States with progressive income taxes;<\/li>\n\n\n\n
- States with flat income taxes;<\/li>\n\n\n\n
- States with no income taxes.<\/li>\n<\/ul>\n\n\n\n
1. States with progressive income taxes<\/strong><\/h4>\n\n\n\n
Out of all the U.S. states, the vast majority share the progressive income tax structure<\/strong>. A progressive tax means a tax rate progresses (or increases) as taxable income increases. What is characteristic of this tax structure is that each state sets its rates and tax brackets.<\/p>\n\n\n\n
2023 tax rates for states with progressive income taxes<\/strong><\/h3>\n\n\n\n
Apply to income earned in 2023, reported on tax return filed in 2024. <\/em><\/p>\n\n\n\n
State<\/strong><\/td> Tax rates<\/strong><\/td> Income tax bracket<\/strong><\/td><\/tr> Alabama<\/td> 2% – 5%<\/td> $500 – $3,001<\/td><\/tr> Arkansas<\/td> 0% – 4.7%<\/td> $5,100 – $87,000<\/td><\/tr> California<\/td> 1% – 13.3%<\/td> $10,099 – $1,000,000<\/td><\/tr> Connecticut<\/td> 3% – 6.99%<\/td> $10,000 – $500,000<\/td><\/tr> Delaware<\/td> 0% – 6.6%<\/td> $2,000 – $60,001<\/td><\/tr> District of Columbia<\/td> 4% – 10.75%<\/td> $10,000 – $1,000,000<\/td><\/tr> Georgia<\/td> 1% – 5.75%<\/td> $750 – $7,001<\/td><\/tr> Hawaii<\/td> 1.4% – 11%<\/td> $2,400 – $200,000<\/td><\/tr> Iowa<\/td> 4.4% – 6%<\/td> $6,000 – $75,000<\/td><\/tr> Kansas<\/td> 3.1% – 5.7%<\/td> $15,000 – $30,000<\/td><\/tr> Louisiana<\/td> 1.85% – 4.25%<\/td> $12,500 – $50,001<\/td><\/tr> Maine<\/td> 5.8% – 7.15%<\/td> $24,500 – $58,050<\/td><\/tr> Maryland<\/td> 2% – 5.75%<\/td> $1,000 – $250,000<\/td><\/tr> Massachusetts<\/td> 5% – 9%<\/td> $8,000 – $1,000,000<\/td><\/tr> Minnesota<\/td> 5.35% – 9.85%<\/td> $30,070 – $183,341<\/td><\/tr> Mississippi<\/td> 0% – 5%<\/td> 5% for $10,001 and over<\/td><\/tr> Missouri<\/td> 0% – 4.95%<\/td> $1,207 – $8,449<\/td><\/tr> Montana<\/td> 1% – 6.75%<\/td> $3,600 – $21,600<\/td><\/tr> Nebraska<\/td> 2.46% – 6.64%<\/td> $3,700 – $35,730<\/td><\/tr> New Jersey<\/td> 1.4% – 10.75%<\/td> $20,000 – $1,000,000<\/td><\/tr> New Mexico<\/td> 1.7% – 5.9%<\/td> $5,500 – $210,000<\/td><\/tr> New York<\/td> 4% – 10.9%<\/td> $8,500 – $25,000,000<\/td><\/tr> North Dakota<\/td> 0% – 2.5%<\/td> $44,775 – $225,975<\/td><\/tr> Ohio<\/td> 0% – 3.75%<\/td> $26,050 – $115,300<\/td><\/tr> Oklahoma<\/td> 0.25% – 4.75%<\/td> $1,000 – $7,200<\/td><\/tr> Oregon<\/td> 4.75% – 9.9%<\/td> $4,050 – $125,000<\/td><\/tr> Rhode Island<\/td> 3.75% – 5.99%<\/td> $73,450 – $166,950<\/td><\/tr> South Carolina<\/td> 0% – 6.4%<\/td> $3,200 – $16,040<\/td><\/tr> Vermont<\/td> 3.35% – 8.75%<\/td> $45,400 – $229,500<\/td><\/tr> Virginia<\/td> 2% – 5.75%<\/td> 2% – 5.75%<\/td><\/tr> West Virginia<\/td> 2.36% – 5.12%<\/td> $10,000 – $60,000<\/td><\/tr> Wisconsin<\/td> 3.5% – 7.65%<\/td> $13,810 – $304,170<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Source: Tax Foundation<\/em><\/p>\n\n\n\n
2024 tax rates for states with progressive income taxes<\/strong><\/h3>\n\n\n\n
Apply to income earned in 2024, reported on tax return filed in 2025. <\/em><\/p>\n\n\n\n
- For single taxpayers<\/strong> and married individuals filing separately, <\/strong>the <\/strong>standard deduction rises to $14,600 for 2024 (an increase of $750 from 2023).\u00a0<\/li>\n\n\n\n
- For married couples filing jointly, <\/strong>the standard deduction rises to $29,200 for 2024 (an increase of $1,500 from tax year 2023).\u00a0<\/li>\n\n\n\n
- 2024 tax brackets and rates<\/a><\/li>\n<\/ul>\n\t
- 2023 tax brackets and rates<\/a><\/li>\n\t
- Business or individual income tax<\/a><\/li>\n\t
- How does income tax work?<\/a><\/li>\n<\/ul>\n\t
- Who is collecting the money from tax?<\/a><\/li>\n\t