Types of Taxes

Taxes on Purchases

• State and local sales taxes are added to the purchase price of products.
• An excise tax is imposed on specific goods and services, such as gasoline, cigarettes, alcoholic beverages, tires, air travel, and telephone service.

Taxes on Property

• The real estate property tax is based on the value of land and buildings.
• Personal property taxes on the value of automobiles, boats, furniture, and farm equipment are imposed in some areas

Taxes on Wealth

• An estate tax is imposed on the value of an individual’s property at the time of his or her death.
• An inheritance tax is levied on the value of property bequeathed by a deceased individual.
• Gift amounts greater than $13,000 are subject to federal tax.

Taxes on Earnings

• Social Security taxes are used to finance the retirement, disability, and life insurance benefits of the federal government’s social security program.
• Income tax is the major financial planning aspect of taxes for most individuals. In addition to federal income tax, all but seven states also have a state income tax.