In Prescott, Arizona, an income tax is imposed on a certain percentage of the income of all individuals and businesses. Typically, income from all sources may be taxed. The federal government has the authority 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 allowed to impose income taxes of their own.
The federal income tax must be paid by everyone 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 Lawyer in Prescott, Arizona if you are not clear about what your state and federal tax liability.
Income Tax Deductions in Prescott, Arizona
A tax deduction is simply a reduction in the part of a person's income that 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 your tax bill. A tax credit normally results in a greater reduction in tax liability than a reduction in the same amount.
Many common expenses in Prescott can be deducted, in whole or in part, from your taxable income. Federal tax deductions include charitable contributions, union dues, interest paid on a mortgage, and state and local taxes.
How Can A Prescott, Arizona Tax Attorney Help?
Income tax laws can get very complex. If you are in Prescott, Arizona and have any questions about your taxes, you should consult with an accountant or local tax Lawyer to avoid tax problems, such as audit or wage garnishment.