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Individual Tax

You must pay federal income tax regardless of where you live in the United States. Most states also have additional state income tax. However, states like Texas, Florida, Nevada, Washington, Wyoming, South Dakota, and Alaska have no state income tax. Tennessee and New Hampshire only apply state income tax to interest and dividend income. Each state will collect taxes from you in one way or another. Generally, states that don't charge income tax impose higher rates on things like property tax or sales tax. There may be a city income tax or municipality income tax in some places. Even though taxes are applicable for individuals (salaried or self-employed), corporations (small, midsize, or large businesses), trusts, descendants' estates and certain bankruptcy estates.

There are three factors to determine how an individual's income is subject to US income taxes:
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• Status - resident or non-resident
• Source of income
• Whether or not connected to US trade or business

US citizens and residents (based on "green card" or "substantial presence") are taxed on their worldwide income. US citizens or permanent resident who establish a foreign tax home and meet certain qualifications can elect to exclude annual foreign earned income up to a threshold (subject to change every year). Except for the exclusion, both foreign and US source of income are subject to US income tax. To reduce double tax, taxpayer may elect to take a foreign tax credit or foreign tax deduction on taxes paid to foreign government.
Non-resident aliens are taxed on their US source income only.

• If they do not engage in business in the US and their only income is fixed determinable annual or periodical income (FDPI) such as interest, dividends, royalties, and rents, the FDPI income will be taxed at a flat rate of 30% (or a lower flat rate by a tax treaty). The 30% tax will be withheld at sources. These non-residents do not have to file income tax return if taxes are properly withheld on their FDPI income.
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• If non-resident aliens engage in business in the US, they must file a tax return (Form 1040NR), and any income connected to the US trade or business is subject to a progressive tax similar to that on US resident. The major difference between filing F1040 and F1040NR are: non-resident aliens who file 1040RN generally cannot claim exemption for their spouses or dependent children. (With certain exceptions for residents of Canada, Mexico, Japan and Republic of Korea) Moreover, non-resident alien do not have standard deduction.
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Credits & Deductions for Individuals

Subtract tax credits from the amount of tax you owe. There are two types of tax credits:

  • A nonrefundable tax credit means you get a refund only up to the amount you owe for taxes.

  • A refundable tax credit means you get a refund, even if it is more than what you owe.

 

Credits for Individuals

 

Family & Dependents

  • Earned Income Tax Credit

  • Child and Dependent Care Credit

  • Adoption Credit

  • Child Tax Credit

  • Credit for the Elderly or Disabled

 

Health Care

  • Premium Tax Credit (Affordable Care Act)

  • Health Coverage Tax Credit

 
Income and Savings

  • Earned Income Tax Credit

  • Saver's Credit

  • Foreign Tax Credit

  • Excess Social Security and RRTA Tax Withheld

  • Credit for Tax on Undistributed Capital Gain

  • Nonrefundable Credit for Prior Year Minimum Tax

  • Credit to Holders of Tax Credit Bonds

 

​Homeowners

  • Mortgage Interest Credit

  • Residential Energy Efficient Property Credit

  • Nonbusiness Energy Property Credit

  • Low-Income Housing Credit (for Owners)

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Education

  • Lifetime Learning Credit

  • American Opportunity Tax Credit


Electric Vehicle Credit

  • Plug-in Electric Drive Motor Vehicle Credit

  • Plug-in Conversion Credit (Section 30B(i))

  • Alternative Fuel Vehicle Refueling Property Credit (Section 30C)

  • New Qualified Fuel Cell Motor Credit (Section 30B(b))

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Deductions

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Work-Related

  • Deductible Business Expenses

  • Standard Mileage Rates

  • Home Office

  • Business Use of Car

  • Business Travel Expenses

  • Bad Debt

  • Business Entertainment Expense

  • Depreciation and Amortization

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Investments

  • Sale of Home

  • Individual Retirement Arrangements (IRAs)

  • Capital Losses

 

Education

  • Student Loan Interest

  • Tuition and Fees Deduction

  • Work-Related Educational Expenses

  • Teacher's Educational Expenses​​


Health Care

  • Medical and Dental Expenses

  • Health Savings Account (HSA)

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Itemized Deductions

  • Standard Deduction

  • Deductible Taxes

  • Property Tax

  • Real Estate Tax

  • Sales Tax

  • Charitable Contributions

  • Gambling Loss

  • Miscellaneous Expenses

  • Interest Expense

  • Home Mortgage Interest

  • Union/Club Expenses

  • Moving Expenses

 

Miscellaneous Deductions

  • Alimony Paid

  • Casualty, Disaster and Theft Losses

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