In Palo Alto, California, an income tax is imposed on a certain percentage of the income of all individuals and businesses. Generally, income from all sources can be taxed. The federal government has had explicit constitutional power to impose an income tax since 1916, with the passage of the 16th Amendment. This came after the Supreme Court had repeatedly found a federal income tax to be unconstitutional. States, including California, have always been free to impose whatever type of income tax they liked.
Everybody in the United States must pay the federal income tax. However, you only have to pay the state income tax of the state in which you reside. You should speak with an accountant or tax lawyer in Palo Alto, California if you aren't clear about what system your state has.
Income Tax Deductions in Palo Alto, California
A tax deduction is an expense which, in whole or in part, is subtracted from a person's taxable income. For example, if you make ,000 in a year, and the tax rate is 10%, a deduction of ,000 results in only ,000 being taxed. This means that you will pay ,900 instead of ,000.
This should not be confused with a tax credit, which is simply a reduction in somebody's tax bill. A tax credit will usually reduce your tax liability far more than a tax deduction of the same amount.
Under federal law, many expenses in Palo Alto are tax-deductible, including interest paid on a mortgage, charitable contributions, the cost of tax advice, and union or professional dues, among many others.
How Can A Palo Alto, California Tax Attorney Help?
Income tax laws can get quite complex, especially when large amounts of money from multiple sources are involved. It would not be a bad idea to call a Palo Alto, California tax Attorney to avoid the consequences of under-paying, and to prevent you from over-paying.