US Income Tax Guide US Income Tax Guide

Tax Residency

All individuals except nonresident alien individuals are generally subject to income tax. An individual is a nonresident alien if such individual is neither a citizen of the United States nor a resident of the United States.

An alien individual is a resident of the United States with respect to any calendar year if such individual:

– is a lawful permanent resident of the United States at any time during such calendar year,
– meets the substantial presence test or
– makes the first time election.

The tax liability of nonresident alien individuals is limited to income from sources within the United States.

Taxable Income

Gross income means all income from whatever source derived, including (but not limited to) the following items:

(1)Compensation for services, including fees, commissions, fringe benefits, and similar items;
(2)Gross income derived from business;
(3)Gains derived from dealings in property;
(4)Interest;
(5)Rents;
(6)Royalties;
(7)Dividends;
(8)Annuities;
(9)Income from life insurance and endowment contracts;
(10)Pensions;
(11)Income from discharge of indebtedness;
(12)Distributive share of partnership gross income;
(13)Income in respect of a decedent; and
(14)Income from an interest in an estate or trust.

Withholding Taxes

Withholding tax is imposed on salary and wage income, tip income, certain gambling winnings, pensions, and retirement distributions.

Withholding tax may also apply to nonresident alien individuals with respect to their income from sources within the United States.

US Tax Rates

Filing threshold in 2024 is $ 14,600 (single individuals). For married couples, the filing threshold for joint returns increases to $ 29,200.

RateIncome
10%$11,600 or less
12%$11,600 – $47,150
22%$47,150 – $100,525
24%$100,525 – $191,950
32%$191,950- $248,725
35%$248,725 – $609,350
37%$609,350 & more
Tax rates 2024 (Filing status is single)

0%,15%, and 20% Rates Apply to most Long-term Capital Gains. The effective tax rate on capital gains and qualified dividends, as well as on other investment income, increases by 3.8% for higher-income taxpayers subject to the additional tax on net investment income.

Regional Taxes

Most individual U.S. states collect a state income tax in addition to the federal income tax,. Some local governments also collect income tax. Forty-three states and many localities in the United States impose an income tax on individuals. Eight states impose no state income tax. The top tax rates in the individual states range from 0% -approx. 13%. The highest top tax rate is charged in California.

US Social Security Systems

The federal Old-Age, Survivors, and Disability Insurance (OASDI) program is the basis of the US social security system. It is administered by the Social Security Administration. The Social Security Act encompasses several social welfare and social insurance programs.