In Indianapolis, Indiana, income tax is imposed on most sources of income that a person receives in a given year. Under federal, state, and most local laws income from all sources can be taxed. The federal government imposes an income tax on all persons and entities present in the United States. The power to tax incomes was granted to the federal government in 1913 with the ratification of the 16th Amendment to the Constitution. Before that time, the Supreme Court had found a federal income tax unconstitutional, prompting the passage of the amendment. Of course, individual states, including Indiana, were free to impose income taxes as they saw fit.
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 Indianapolis, Indiana if you are not clear about what your state and federal tax liability.
Income Tax Deductions in Indianapolis, Indiana
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 typically results in a greater reduction in tax liability than a deduction in the same amount.
Lots of expenses that are common in Indianapolis are tax deductible. Federal tax deductions include mortgage interest, union dues, interest paid on mortgages, and others.
How Can A Indianapolis, Indiana Tax Attorney Help?
Income tax law can get fairly complex in Indianapolis, Indiana. If you have any questions about your income tax liability, you should not hesitate to speak with a tax Attorney sooner, rather than later.