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U.S. Tax Laws and Tax System





 








U.S. Income Taxes


(Last updated, July 2008)

Individual Income Tax: The U.S. individual income tax rates for 2008 are 10%-35%. 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 2008




Single Taxpayers
   Taxable income:              Tax:             On amount over
Over But not over Tax +% On amount over
$0 $8,025 $0.00 10 $ 0
8,025 32,550 802.50 15 8,025
32,550 78,850 4,481.25 25 32,550
78,850 164,550 16,056.25 28 78,850
164,550 357,700 40,052.25 33 164,550
357,700 ----- 103,791.75 35 357,700



Married Individuals Filing Joint and Surviving Spouses

   Taxable income:              Tax:             On amount over
Over But not over Tax +% On amount over
0$ 16,050 $0.00 10 0$
$16,050 $65,100 1,605.00 15 16,050
65,100 131,450 8,962.50 25 65,100
131,450 200,300 25,550.00 28 131,450
200,300 357,700 44,828.00 33 200,300
357,700 ----- 96,770.00 35 357,700


Married Individuals Filing Separate

   Taxable income:              Tax:             On amount over
Over But not over Tax +% On amount over
$0 $8,025 $0.00 10 $0
8,025 32,550 802.50 15 8,025
32,550 65,725 4,481.25 25 32,550
65,725 100,150 12,775.00 28 65,725
100,150 178,850 22,414.00 33 100,150
178,850 ----- 48,385.00 35 178,850


Heads of Households in U.S.

   Taxable income:              Tax:             On amount over
Over But not over Tax +% On amount over
$0 $11,450 $0.00 10 $0
11,450 43,650 1,145.00 15 11,450
43,650 112,650 5,975.00 25 43,650
112,650 182,400 23,225.00 28 112,650
182,400 357,700 42,755.00 33 182,400
357,700 ----- 100,604.00 35 357,700


Estates and Trusts in U.S.

   Taxable income:              Tax:             On amount over
Over But not over Tax +% On amount over
$0 $2,200 $0.00 15 $0
2,200 5,150 $330.00 25 2,200
5,150 7,850 1,067.50 28 5,150
7,850 10,700 1,823.50 33 7,850
10,700 ----- 2,764.00 35 10,700


The U.S. federal corporate tax rates for 2008 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-2008


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%



Personal Service Corporations in U.S.

Personal service corporations are subject to a flat tax of 35% regardless of their income.

Personal Holding Company in U.S.

Personal holding companies are subject to an additional tax on any undistributed personal holding company income.


Year Rate
2008 15.0%


Accumulated Earnings Tax по U.S.

In addition to the regular tax, a corporation may be liable for an additional tax on its accumulated taxable income in excess of $250,000 ($150,000 for personal service corporations).

Year Rate
2008 15.0%


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 15%, 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.


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 equal for employers and employees, 6.2% each up to a ceiling of $102,000 for 2008.
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 $ 102,000 (for 2008) and 2.9% for Medicare with no ceiling.


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