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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 �� 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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