United States

Individual - Other taxes

Last reviewed - 20 January 2020

Social security contributions

For 2019, social security tax (old-age, survivors, and disability) will be withheld at the rate of 6.2% on the first USD 132,900 of wages paid. For 2020, social security tax (old-age, survivors, and disability) will be withheld at the rate of 6.2% on the first USD 137,700 of wages paid.

Medicare hospital insurance taxes continue to be withheld on 1.45% of all wages. The social security taxes for resident self-employed individuals are equal to 12.4% of the first USD 132,900 for 2019 and USD 137,700 for 2020. Medicare hospital insurance taxes are equal to 2.9% of all net self-employment income. Note that non-resident aliens are not subject to social security and Medicare hospital insurance taxes on self-employment income.

For wages received in tax years beginning after 31 December 2012, the employee portion of Medicare hospital insurance tax is increased by an additional 0.9% on wages received in excess of USD 250,000 for a married couple filing a joint return, USD 125,000 for a married individual filing a separate return, and USD 200,000 for all other individuals (these thresholds are not indexed for inflation).

Social security and Medicare hospital insurance taxes are not deductible when determining an employee's taxable income. However, a deduction is allowed for an amount equal to one-half of the combined self-employment social security and Medicare hospital insurance taxes that are imposed.

Note that the United States has entered into Totalisation Agreements with several nations (see Tax treaties in the Foreign tax relief and tax treaties section) for the purpose of avoiding double taxation of income with respect to social security taxes and allowing individuals who participate in more than one social security system to qualify for benefits that would not be available under domestic law. These agreements must be taken into account when determining whether any alien is subject to US social security and Medicare hospital insurance taxes or whether any US citizen or resident alien is subject to the social security taxes of a foreign country.

Capital gains taxes

The maximum federal tax rate on capital gains is 20% for assets held for more than 12 months. The graduated income tax rates apply to capital gains from assets held for 12 months or less.

There are three capital gains income thresholds. For 2020, these thresholds apply to maximum taxable income levels, as follows (amounts in USD):

Single taxpayers Married filing jointly Head of household Married filing separately Long-term capital gains rate (%)
Up to 40,000 Up to 80,000 Up to 53,600 Up to 40,000 0
40,001 to 441,050 80,001 to 496,600 53,601 to 469,050 40,001 to 248,300 15
Over 441,050 Over 496,600 Over 469,050 Over 248,300 20

For 2019, these thresholds apply to maximum taxable income levels, as follows (amounts in USD):

Single taxpayers Married filing jointly Head of household Married filing separately Long-term capital gains rate (%)
Up to 39,375 Up to 78,750 Up to 52,750 Up to 39,375 0
39,375 to 434,550 78,750 to 488,850 52,750 to 461,700 39,375 to 244,425 15
Over 434,550 Over 488,850 Over 461,700 Over 244,425 20

Consumption taxes

The United States does not have a federal level consumption tax, but most states and many municipal authorities have sales and use taxes. They are generally imposed as a percentage of the retail sales price and the combined state and local rate may rise above 10%. Each state has its own tax rate and rules regarding which purchases are taxable.

The US Supreme Court, on 21 June 2018, in the Wayfair case, overruled prior Court decisions that had precluded states from imposing a sales and use tax collection obligation on sellers unless they had a physical presence in the state. While many questions remain, the Wayfair decision generally has increased the number of states where companies must collect and remit sales and use tax.

Net wealth/worth taxes

The United States does not have a federal level net wealth/worth tax.

Inheritance, estate, and gift taxes

The United States imposes a federal estate tax on the fair market value of assets that an individual owns at death. Individuals who are domiciled in the United States are subject to federal estate tax on their worldwide assets (usually including life insurance proceeds). Individuals who are not US-domiciled are subject to US federal estate tax on only US-situs assets. Because the term 'domicile' is extremely subjective, it is often difficult to know whether a particular individual is resident or not for estate tax purposes.

The American Taxpayer Relief Act of 2012 increased the top estate, gift, and generation-skipping transfer tax rates from 35% to 40% for estates of decedents dying after 31 December 2012.

P.L. 115-97, the tax legislation signed by President Trump on 22 December 2017, maintains the estate, gift, and generation-skipping transfer taxes at the 40% tax rate. For estates of decedents dying and gifts made after 2017, P.L. 115-97 almost doubled the exemption for all three taxes; the exemption for 2020 is USD 11,580,000 per person and USD 11,400,000 for 2019. The gift and estate tax exemptions remain unified, so any use of the gift tax exemption during one's lifetime would decrease the estate tax exemption available at death. The current law allowing a ‘step-up’ in basis to fair market value at date of death will continue. The current gift tax exclusion for annual gifts of up to USD 15,000 per donee (in 2019 and 2020) is retained, as well as the provisions for unlimited transfers directly to educational institutions and health care providers.

The purpose of the gift tax is to prevent the lifetime transfer of assets without estate tax liability. Similarly, a generation-skipping tax exists to prevent avoidance of tax by skipping generations when making large transfers of assets.

Note that assets bequeathed to an individual's spouse are exempt from estate and gift tax until the spouse's death, if such spouse is a US citizen.

Many states have estate and gift taxes similar to the federal taxes. As an alternative, some states may have an inheritance tax, which is a tax that imposes the liability on the recipient instead of the donor.

Property taxes

The United States does not have a federal level property tax, but property taxes are imposed in most states on the owner of both commercial and residential real property, based on the value of the property. The tax is usually imposed at the municipality or country level, and the tax rates vary widely depending on the fiscal needs of the taxing jurisdiction. Personal property taxes are also imposed in a number of states, but usually only on automobiles. A few states impose intangible property taxes on investment assets.

Luxury and excise taxes

The United States does not have federal level luxury taxes. However, the federal and state governments impose excise taxes on a variety of goods. For example, a federal and state excise tax is imposed on gasoline and diesel fuel used for transportation. The excise taxes are levied item by item and lack any uniformity in rates.