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U.S. Tax Laws and Tax System













U.S. Income Taxes 2013


(Last updated, June 2013)

Individual Income Tax: The U.S. individual income tax rates 2013 are 10%-39.6%.
However if under the AMT, Alternative Minimum Tax, method the tax payable exceeds the tax payable under the regular income tax method, the AMT calculation is effective.
The AMT method is based on the gross income with reduced tax deductions and credits.

Tax Rate Schedules for Individuals and Trusts 2013($)




Single Taxpayers
   Taxable income:              Tax:             On amount over
Over But not over Tax +% On amount over
$0 $8,925 $0.00 10 $ 0
8,925 36,250 892 15 8,925
36,250 87,850 4,991 25 36,250
87,850 183,250 17,891 28 87,850
183,250 398,350 44,603 33 183,250
398,350 400,000 115,586 35 398,350
400,000 ----- ----- 39.6 -----



Married Individuals Filing Joint and Surviving Spouses

   Taxable income:              Tax:             On amount over
Over But not over Tax +% On amount over
0$ $17,850 $0.00 10 0$
$17,850 $72,500 $1,785 15 17,850
$72,500 $146,400 9,982 25 72,500
$146,400 $223,050 28,457 28 146,400
223,050 398,350 49,919 33 223,050
398,350 450,000 107,768 35 398,350
450,000 ----- ----- 39.6 -----


Married Individuals Filing Separate

   Taxable income:              Tax:             On amount over
Over But not over Tax +% On amount over
$0 $8,925 $0.00 10 $0
8,925 36,250 892 15 8,925
36,250 73,200 4,991 25 36,250
73,200 111,525 14,229 28 73,200
111,525 199,175 24,960 33 111,525
199,175 225,000 53,884 35 199,175
225,000 ----- ----- 39.6 -----


Heads of Households in U.S.

   Taxable income:              Tax:             On amount over
Over But not over Tax +% On amount over
$0 $12,750 $0.00 10 $0
$12,750 48,600 1,275 15 12,750
48,600 125,450 6,652.5 25 48,600
125,450 203,150 25,865 28 125,450
203,150 398,350 47,621 33 203,150
398,350 425,000 121,354.5 35 398,350
425,000 ----- ----- 39.6 -----
Note: Non residents can not enjoy tax benefits resulting from joint or head of households filing.

Estates and Trusts in U.S.

   Taxable income:              Tax:             On amount over
Over But not over Tax +% On amount over
$0 $2,450 $0.00 15 $0
$2,450 5,700 367 25 2,450
5,700 8,750 1,180 28 5,700
8,750 11,950 2,034 33 8,750
11,950 ----- 3,090 39.6 -----


U.S. Corporate Income Tax Rates 2013

The U.S. federal corporate tax rates for 2013 are 15%-35%, depending on the annual taxable income.
Corporations may be taxed under certain conditions with the 20% AMT method.


U.S. Corporate Income Tax Rates 2013


Taxable income over Not over Tax rate
$0 $50,000 15%
50,000 75,000 25%
75,000 100,000 34%
100,000 335,000 39%
335,000 10,000,000 34%
10,000,000 15,000,000 35%
15,000,000 18,333,333 38%
18,333,333 .......... 35%


Capital Gains: Capital gains of corporations are added to the regular income. There is a rollover relief for sale of business assets.
For individuals long term capital gain, When holding a qulified capital property more than 12 months (before selling), the tax rate is generally 20%, zero for low income earners, subject to certain conditions.
Short term capital gain is added to ordinary income and is taxed at regular tax rate.


Residence U.S.


A company is U.S. resident if incorporated in the U.S.
Both, resident companies and individuals pay taxes on their worldwide income, with relief given under certain conditions for foreign taxes paid, if any.
Individuals can invest in U.S. resident companies from abroad, but need to apply for a EB5 visa first.


The U.S. Tax Deductions

  • Losses are carried forward 20 years. There is a carry back of losses for 2 years under certain terms.
  • Consolidated tax returns are allowed under certain terms and limitations, mainly a minimum 80% holding of one subsidiary by the parent company.
  • Thin Capitalization-Interest expenses paid to related parties are not allowed when the debt to equity ratio is not substantiated by the payer.


Withholding of Tax at Source

The withholding of tax at source from the following payments to non residents payee is as follows:
Dividend- 30%.
Interest- 30%.
Royalties- 30%.

Income tax treaty with the country of the nonresident may reduce the withholdings.


Social Security

Social Security includes OASDI, Old Age, Survivor Disability Insurance, and Medicare.
The rate of OASDI is 6.2% for employers and 6.2% for employees, up to a ceiling of $ 113,700 for 2013 Medicare tax rate is 1.45% for each ,the employer and the employee.
There is no ceiling for Medicare tax.
Self employed pay 12.4% on OASDI on amounts up to $ 113,700 for 2013 and 3.3% for Medicare with no ceiling.

Starting 2013 there is an increased 3.8% Medicare tax for higher income individuals on investment income called unearned income Medicare contribution tax .


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