What we need to know about taxes?

Taxes are mandatory contributions levied on individuals or corporations by government. There are various types of taxes at different levels. It can be local, regional, or national.

The mostly common taxes that we deal with are sales taxes, income taxes, property taxes.

Income Tax:

Income tax is a percentage of generated income that is paid to the state or federal government. Income tax is collected in bracket structure based on taxpayer's income and household status. Both State income tax and Federal income tax are levied. Tax filing deadline is April 15th every year, though extension can be applied if the tax filers need additional time to prepare the filing.

The 2024 Federal tax bracket is as below table:

source from IRS.gov.com

There is an adjustment to 2025 tax filing bracket. For detailed new Federal tax bracket, go to https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025

for detailed tax bracket information.

For the State of California, Franchise Tax Board oversees all tax related matters and regulations. Visit https://www.ftb.ca.gov/ for information on California State income tax.

Sales Tax:

in U.S., Sales tax is levied on certain goods and services and is typically added to the purchase price at the time of sale. The percentage of sales tax charged varies by state, county and city. Sales tax is considered a consumption tax as it is levied on the consumer. Outside of U.S., most countries have VAT tax, and VAT tax is already added to the purchase price that consumer pays.

Sales tax varies by states in the U.S. In California, new sales tax rate has been effective from April 1st, 2025. Many cities saw their sales tax increased from previous levy rate. For example, the city of Los Angeles has sales tax increasing from 9.5% to 9.75%.

To find out the latest sales tax in the State of California for all counties and cities, please visit the official website below: https://www.cdtfa.ca.gov/taxes-and-fees/sales-use-tax-rates.htm

Property Tax:

Property tax is determined by the value of the real estate and the land it sits on. Each U.S. State has its own property tax rate. In California, the base tax rate is 1% of the property's purchase price. The county assessor conducts an annual review of the assessment, with a 2% limit on the annual increase of the assessed value. When a property is sold or transferred to a new owner, it triggers a re-assessment of the property tax. The new purchase price then becomes the new basis for the property tax levy.

Very often, the local city also levies a type of special assessment tax on top of base tax rate. In California, the property tax information is available on county website. One important thing to remember is that California property tax is calculated from July 1st of current year to June 30th of the new year. Every year in October the county will release new tax statement that is made up of the first installment and the second installment statement with equal payment amount. The first installment is due on November 1st and delinquent after December 10th. The second installment is due on February 1st and delinquent after March 10th. Property tax information can be found on county website. For example, to view property tax of Los Angeles, go to https://www.propertytax.lacounty.gov/ and input either property address or assessor's parcel number APN to search for the tax information and its history.

Besides sales tax, income tax and property tax, payroll tax is imposed both on employers and employees and are withheld from each paycheck to the individual employee by employer. In my next article, I will further explain payroll tax and its components. Keep learning!