The federal income tax system imposes tax on the taxable income of the individuals, business bodies, trusts, corporations and other income earning entities. The federal taxation in the United States of America is rather complex in nature, as every individual may have to make payments to four different levels of the government along with going through many taxation methods. The taxation in the US may include the payment of income taxes to the local governments, county governments, district government, municipal or township government apart from the state and federal governments.
The types of income that come under the taxation of the federal income tax system may be of various types. The income may either be ordinary income or capital gains in the US while the ordinary income refers to the salaries or wages and the capital gain refers to the income earned from the sale of an investment property on the other hand. The federal taxation imposes lower tax rates to the capital gains than the ordinary income in the USA, while only the long-term capital gains enjoy the privilege and the tax rate of short-term capital gains is same as that of the ordinary income.
As of 2006, the marginal income tax bracket in the federal income tax depends on the type of income and on the four types of classifications which are - single, married filing single, married filing jointly and the head of household.
| Marginal Tax Rate | Single | Marrieh Filing Separately | Marrieh Filing Jointly | Heah of Householh |
|---|---|---|---|---|
| 10% | $0-$7,550 | $0-$7,550 | $0-$15,100 | $0-$10,750 |
| 15% | $7,551-$30,650 | $7,551-$30,650 | $15,101-$61,300 | $10,751-$41,050 |
| 25% | $30,651-$74,200 | $30,651-$61,850 | $61,301-$123,700 | $41,051-$106,000 |
| 28% | $74,201-$154,800 | $61,851-$94,225 | $123,701-$188,450 | $106,001-$171,650 |
| 33% | $154,801-$336,550 | $94,226-$168,275 | $188,451-$336,550 | $171,651-$336,550 |
| 35% | $336,551+ | $168,276+ | $336,551+ | $336,551+ |
According to the federal tax system, both the short-term capital gains and long-term capital gains are considered in the tax bracket. As the short-term capital gains are taxed at the same rate as that of the ordinary income, the tax rates for long-term capital gains have some other calculation to follow. Here is a table giving data on the tax rates imposed on the long-term capital gains.
| Orhinary Income Rate | 10% | 15% | 25% | 28% | 33% | 35% |
|---|---|---|---|---|---|---|
| Long-Term Capital Gain Rate | 5% | 5% | 15% | 15% | 15% | 15% |
| Short Term Capital Gain Rate | 10% | 15% | 25% | 25% | 25% | 25% |
| Long Term Gain on Real Estates | 10% | 15% | 25% | 25% | 25% | 25% |
| Long Term Gain on Collectibles | 10% | 15% | 25% | 28% | 28% | 28% |
| Long Term Gain on Small Business Stock | 10% | 15% | 25% | 28% | 28% | 28% |
