The main types of taxes in the USA fall into eight working categories: federal income tax, state income tax, payroll and self-employment taxes, corporate and business taxes, sales and use taxes, property taxes, excise taxes, and estate and gift taxes. They are collected by three levels of government (federal, state, and local), each drawing authority from a different source. The federal government’s power to tax income comes from the Sixteenth Amendment.1Constitution Annotated | Congress.gov | Library of Congress. U.S. Constitution – Sixteenth Amendment States and localities tax under their own constitutions and statutes. The categories overlap in ways that matter: a single paycheck can be hit by federal income tax, state income tax, and payroll tax before it clears the bank.
Federal Income Tax
The federal income tax is the biggest source of federal revenue and the tax most people mean when they talk about “doing their taxes.” It is progressive, with seven brackets. For tax year 2026, the rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill Only the income that falls inside a given bracket is taxed at that bracket’s rate. Earning $60,000 as a single filer does not put all $60,000 at 22%; it puts the first $12,400 at 10%, the next slice at 12%, and only the portion above $50,400 at 22%.
The 2026 bracket thresholds for single filers are:
- 10% up to $12,400
- 12% from $12,401 to $50,400
- 22% from $50,401 to $105,700
- 24% from $105,701 to $201,775
- 32% from $201,776 to $256,225
- 35% from $256,226 to $640,600
- 37% above $640,600
For married couples filing jointly the brackets are wider. The 10% bracket covers income up to $24,800, the 12% bracket runs to $100,800, and the top 37% rate begins above $768,700.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
Before the rates hit, most filers shrink their taxable income by claiming the standard deduction. For 2026 it is $16,100 for single filers, $24,150 for heads of household, and $32,200 for married couples filing jointly.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill If your qualifying expenses (mortgage interest, state and local taxes, charitable gifts, and so on) add up to more than the standard deduction, you can itemize instead.
Capital Gains
Taxable income is not just wages. Interest, dividends, and profits from selling investments all count. Profit on an asset held longer than one year is a long-term capital gain and gets preferential rates of 0%, 15%, or 20% depending on your total taxable income. For 2026, single filers pay 0% on long-term gains up to $49,450 of taxable income, 15% above that up to $545,500, and 20% higher up. For married couples filing jointly the 15% rate starts above $98,900 and 20% starts above $613,700. Short-term gains, on assets held a year or less, are taxed as ordinary income.
State Income Taxes
Most states impose their own income tax on top of the federal one. Some use a flat rate; some use graduated brackets like the federal system. Nine states charge no personal income tax at all. State taxable income usually starts from the adjusted gross income on your federal return, which keeps the math manageable but means an error at the federal level can flow straight into your state return.
Rates and brackets vary enough that the total income tax you pay depends heavily on where you live. Some states tax investment income on different terms than wages, and many offer credits with no federal counterpart. Because the two systems share that AGI starting point, federal changes often shift what you owe your state.
Payroll and Self-Employment Taxes
Payroll taxes fund Social Security and Medicare and work differently from income tax. Under the Federal Insurance Contributions Act, you and your employer each pay 6.2% of your wages toward Social Security and 1.45% toward Medicare.3GovInfo. 26 U.S. Code 3101 – Rate of Tax The Social Security portion applies only to the first $184,500 of earnings in 2026; wages above that escape the 6.2%.4Social Security Administration. Contribution and Benefit Base Medicare has no wage cap, and high earners owe an extra 0.9% on wages above $200,000 for single filers or $250,000 for married couples filing jointly.5Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
Employers withhold these amounts every pay period and send them to the government with the matching employer share. Business owners who fail to remit withheld payroll taxes face steep penalties and can be held personally liable even when the business is a corporation.
Self-Employment Tax
Freelancers, independent contractors, and sole proprietors pay both sides. The self-employment tax rate is 12.4% for Social Security and 2.9% for Medicare, a combined 15.3%.6Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax The same $184,500 Social Security wage cap applies.4Social Security Administration. Contribution and Benefit Base To partially offset the extra load, you can deduct half of your self-employment tax when calculating adjusted gross income, which lowers your income tax bill.7Internal Revenue Service. Topic No. 554, Self-Employment Tax
That 15.3% sits on top of regular income tax, so the effective rate on self-employment income runs well above what a W-2 employee sees on the same gross number. Quarterly estimated payments keep the April bill from becoming a shock.
Corporate and Business Taxes
C-corporations pay a flat 21% federal income tax on their profits.8Office of the Law Revision Counsel. 26 U.S. Code 11 – Tax Imposed When after-tax profits are distributed to shareholders as dividends, the shareholders pay again at their individual rates. That is the classic double taxation of corporate income.
Many smaller businesses sidestep it by organizing as pass-through entities: S-corporations, partnerships, and LLCs taxed as partnerships. These file informational returns but pay no entity-level federal income tax. Profits flow through to the owners’ 1040s and are taxed at each owner’s individual rate. Depending on entity type and the owner’s role, much of that income can also carry self-employment tax.
Sales and Use Taxes
There is no federal sales tax. Sales taxes belong to state and local governments, and rates vary widely. Five states impose no statewide sales tax; in high-tax localities elsewhere the combined state-and-local rate can approach 10%. Retailers collect at the register and remit to the state.
Use tax is the companion most consumers forget. If you buy from an out-of-state seller who does not collect your state’s sales tax, you owe use tax on that purchase at your state’s rate. Enforcement is spotty on small items but real on big-ticket ones like vehicles and equipment.
A 2018 Supreme Court decision changed sales tax on online shopping. States can require out-of-state retailers to collect sales tax without a physical presence, as long as the seller has a substantial economic connection to the state, such as more than $100,000 in goods delivered or 200 or more transactions annually.9Supreme Court of the United States. South Dakota v. Wayfair, Inc., et al. Most major online retailers now collect in every state that imposes the tax.
Property Taxes
Property taxes are the main money source for local government. Counties and municipalities assess real estate values and apply a local rate, often expressed as a millage (dollars per thousand of assessed value), to produce the annual bill. The revenue funds school districts, fire departments, police, road maintenance, and parks. Your bill moves with two things: the assessed value of your property and the rate your jurisdiction sets each year to meet its budget.
Some jurisdictions also tax personal property such as vehicles and business equipment based on depreciated value. Fall far enough behind and the local government can lien the property and, in many areas, eventually sell it at auction. Homestead exemptions, senior freezes, and other relief programs exist in many places, so a call to your local assessor is worthwhile if you think an assessment is off or you may qualify for a break.
Excise Taxes
Excise taxes target specific products rather than general spending. The federal government taxes gasoline at 18.3 cents per gallon, diesel at 24.3 cents per gallon, plus tobacco, alcohol, airline tickets, and certain heavy vehicles, among others.10Office of the Law Revision Counsel. 26 USC Ch. 32 – Manufacturers Excise Taxes States add their own excise taxes on the same goods, which is why gasoline and cigarette prices swing so much across state lines.
Unlike sales tax, excise taxes are usually built into the sticker price rather than added at the counter. The manufacturer or distributor pays and passes the cost along, so most buyers never see the tax broken out. These taxes both raise revenue and discourage consumption of products with high social or environmental costs.
Estate and Gift Taxes
The federal estate tax applies to a deceased person’s assets before they pass to heirs.11Office of the Law Revision Counsel. 26 U.S. Code 2001 – Imposition and Rate of Tax For 2026, the lifetime exemption is $15,000,000 per person, so estates valued below that owe no federal estate tax.12Internal Revenue Service. What’s New – Estate and Gift Tax Married couples can effectively double the exemption through portability. Only the value above the exemption is taxed, at rates up to 40%.
The gift tax stops people from emptying their estate while alive to escape the estate tax. In 2026, you can give up to $19,000 per recipient per year without filing a gift tax return or touching your lifetime exemption.12Internal Revenue Service. What’s New – Estate and Gift Tax Gifts above the annual exclusion chip away at the $15,000,000 lifetime exemption, which estate and gift taxes share. Payments made directly to a school for tuition or a medical provider for treatment do not count toward either limit.
Some states levy their own estate or inheritance taxes with exemption thresholds far below the federal number. In those states an estate that owes nothing federally can still face a real state bill.
Tax Filing Deadlines and Penalties
Individual federal returns for the prior year are due by April 15.13Internal Revenue Service. IRS Opens Filing Season Filing Form 4868 gives you an automatic six-month extension to submit the return, but it does not extend the deadline to pay. Any tax owed is still due April 15, and interest starts accruing on unpaid balances the day after.
Underreporting income or overstating deductions can trigger an accuracy-related penalty of 20% of the underpayment.14Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments Deliberate evasion is a felony punishable by up to five years in prison and a fine of up to $100,000 ($500,000 for corporations).15Office of the Law Revision Counsel. 26 U.S. Code 7201 – Attempt To Evade or Defeat Tax The IRS treats honest mistakes and willful fraud very differently, with civil penalties and interest on one side and criminal charges on the other. Filing on time (even when you cannot pay in full) and keeping organized records keeps you well clear of the second category.