Different Types of Taxes in US

There are several kind of taxes in US, except the federal income tax which applies to all country the other taxes have their own local state rules.

1. Income Tax
   1.1. Federal Income Tax
   US government collects tax each year based on the income of individuals or families. This is the most important tax in US and it rate varies based on income of the tax payers. Here is the tax rate for a few bracket of a married tax filers in 2014.
25% for income of ~73K to ~148K
28% for income of ~148K to ~226K
33% for income of ~226K to 405K
You can find the complete list at http://taxfoundation.org/article/2014-tax-brackets.
   1.2. State Income Tax
   Most of the us states collect tax in addition to what federal government collects as federal income tax and this is one of the major source of income for US states. Here is some information on state tax based on 2014 rules.

• states like Texas, Florida, Nevada, Washington, Wyoming, South Dakota and Alaska do not collect income tax.
• Tennessee and New Hampshire only applies income tax to interests and dividend.
• 8 states apply single tax rates to all of tax filers
• California has the highest tax rate followed by Hawaii and Oregon.

   1.3. California State Income Tax

   California tax rates for 2 brackets of single tax filer is as below. for married filer the rate remain the same however the brackets are doubled.

9.3% for income of ~50K to ~260K

10.3% for income of ~260K to ~312K

11.3% for income of ~311K to ~520K

2. Sales Tax

In most of the US states when you purchase something you have to pay tax however the five states of Oregon, New Hampshire, Montana, Delaware and Alaska do not have sales tax.
Some items like food and clothes are not taxed in some state too.
In California the base rate of sales tax is 7.5% however groceries and prescription drug are exempt from sales tax.

3. Property Tax

Property tax is another source of income for states however it usually help to pay for public schools, college and similar governmental things.
The highest rate for property tax is in New Jersey (1.89%), followed by New Hampshire (1.89%) and Texas (1.81%). California's property tax is 0.74%.
Please note that in some regions there are other taxes like Mellow-Rooz and ...

4. Capital Gain Tax

Tax on the profit of selling something that was purchased at a lower cost. The most comoon one come from stock market.

Based on the income, it can fall down in 0%, 15% or 20% tax rate bracket.

5. Other Taxes

There are other taxes like estate, gift, hotel and sin taxes that are less important than above ones.

Cheers,

Hadi

References:

http://www.immihelp.com/

http://taxfoundation.org/

Secondary Health Insurance

When you talk about the secondary insurance you usually think of covering the expenses that the primary insurance doesn't cover. This looks good specially when you have planned medical procedure or so as deductibles in the primary insurance can consume your budget very fast.
However on the other hand by emerging HDHP (High Deductible Health Plan) and their bonding to HSA there are some limitation in use of secondary insurance.
Lets review the 3 possibilities for primary and secondary insurances that I can think of:
1. both HSA base
Plans based on HSA, have usually high deductible and therefore the deductible amount should be paid by HSA account first and then insurance kicks in. So only after paying all the deductible, secondary insurance can cover the out of packets expenses left over from primary one which should not help that much. Moreover HSA is per family and can not go more than IRS limit.
2. both traditional base
This can help people with secondary insurance as the secondary one covers some or all of the out of pocket expenses that the primary insurance doesn't cover as if it was the primary one.
3. one HSA and one traditional base
This is not allowed for having secondary insurance and as far as I know the insurances do not let the clients to do that.

Cheers,
HTP

ESPP and TAX

In previous post I mentioned that ESPP is a great way of safe investing if you don't get greedy however by taking some risk and keeping the stock for long time (usually a year) then you can take advantage of some tax write off and gain more. But please keep in mind that this all depends on stock market.
In this post I have tried to illustrate how IRS wants you to report cost, W2 income and Capital gain/loss. In the diagrams it is assumed that purchasing price is 5% below of the minimum price of stock at offering date and purchasing date.
Left-UP Diagram: Since the stock price at offer date is less than purchase date, then the purchasing price is 5% below offer date however the W2 income should be reported as the difference between the current market value and the purchasing price. And since the stocks have not been kept enough at the selling time the short term capital gain is considered as an income which is the same as W2 income at this time.
Right-UP Diagram: The same as previous diagram, the purchasing price is 5% below offer date however the W2 income is less than previous case as in Qualifying Disposition (keeping stock for a long time) the W2 income is the minimum of current market value and offer date price minus purchasing price. Also long term capital gain should be reported as income when selling the stock.

Cheers,
HTP