In Prescott Valley, Arizona, an income tax is imposed on a certain percentage of the income of all individuals and businesses. Typically, income from all sources can be taxed. The federal government has the power to impose an income tax thanks to the 16th Amendment to the U.S. Constitution, enacted in 1916 after the Supreme Court had, on more than one occasion, found a federal income tax to be unconstitutional. Of course, before and after the creation of the federal income tax, states, including Arizona were free to impose income taxes of their own.
The federal income tax must be paid by everybody in the U.S. However, you must only pay the state income tax of the state you live in. You should talk with a financial adviser or tax Attorney in Prescott Valley, Arizona if you are not clear about what your state and federal tax liability.
Income Tax Deductions in Prescott Valley, Arizona
A tax deduction is simply a reduction in the portion of a person's income which is taxable. For example, if someone makes ,000 per year, and gets a ,000 tax deduction, their taxable income is ,000.
This should not be conflated with a tax credit, which is a reduction in one's tax bill. A tax credit normally results in a greater reduction in tax liability than a deduction in the same amount.
Many common expenses in Prescott Valley can be deducted, in whole or in part, from your taxable income. Federal tax deductions include charitable donations, union dues, interest paid on a mortgage, and state and local taxes.
How Can A Prescott Valley, Arizona Tax Attorney Help?
Income tax laws in Prescott Valley, Arizona can get fairly complex. You should speak with an accountant or tax Lawyer if you have any questions about your income tax liability.