• Individuals in the U.S. pay several different types of taxes throughout the year. Some taxes are paid annually. Other taxes are paid whenever an individual conducts a transaction. Understanding the different types of taxes in the USA will help you with your personal tax planning.
  
  

Income Tax

• Income tax refers to money paid to the government for the privilege of earning money in the country, state or city. The federal government, state governments and city government impose a tax on the income earned within the appropriate jurisdiction. Employers withhold income taxes from individual employee's paychecks and remit the amount to the appropriate government. Money earned by self-employed individuals is either paid quarterly or when the individual files her tax return.
  
  

Sales Tax

• Many jurisdictions impose a sales tax on sales that occur within the city, state or county limits. Sales tax may not apply to all sales; some types of merchandise may be excluded from sales tax. The retailer collects the applicable sales tax and remits the amount to the appropriate agency. The money raised through sales tax is used to fund public service needs, such as firefighter salaries, as well as road repairs.
  
  

Property Tax

• Counties and cities throughout the country impose property tax on an individual's real estate. The property tax is based on the assessed value of the property and the tax rate for that area. The tax rate may differ, depending on how the area is zoned. Industrial companies may pay higher tax than individuals. Public schools and other local services are funded by the money collected through property taxes.
  
  

Social Security Tax

• Social security tax is paid by employers, employees and self-employed individuals. Employers withhold one half of this tax from individual employee paychecks and pay the other half before sending it to the federal government. Self-employed individuals pay the entire amount when they file their annual tax return. Collection of the social security tax is required by the Federal Insurance Contributions Act, or FICA. The social security tax is collected for the purpose of providing for retirement income in the future, as well as disability benefits and providing benefit payments to survivors.
  
  

Medicare Tax

• Collection of the Medicare tax is also required by the Federal Insurance Contributions Act. This tax is collected to fund the Medicare program. Retired individuals are entitled to receive Medicare benefits to pay for their health care.