Tax 101: 5 Types of Tax You Need to Know

One thing that many people forget is to include taxes in their financial plans. They are too focused on saving and spending and forget that tax does exist. As a mandatory contribution, tax is crucial for a nation and also the person’s well-being. If you want to be a better money manager, then you can’t escape learning about taxes in your finance. But first, here are the five taxes you need to know.

5 Taxes You Need to Know

  1. Income Tax. 

This tax is the one that is directly cut from your paycheck. Depending on where you live, the income tax may differ. In the US, several states may put the state income tax the same as the federal one, or maybe even lower.

  1. Corporate tax

As the name implies, this tax comes from the corporation. The government requires all corporations to contribute a percentage of their profit to the local and federal government. However, the corporate tax is more common in federal programs. 

  1. Sales Tax

Whenever you purchase something, you are paying the sales tax. This is common in luxury goods or when you are purchasing from a chain store. Not to be confused with the tariff, as this tax applies equally to both domestic and imported products.

This tax is commonly on the receipt you get after the purchase. Unlike other types of tax, you don’t have to report this tax because you already paid it.

  1. Property tax

The government calculates this tax based on several things such as location, exact property value, and the general value of the area. They already do all of the calculations and you need to comply if it’s correct or dispute if they miscalculate the land which affects the amount you have to pay.

  1. Tariff 

The name may not have the term, but it counts as one. Imported goods are taxed to promote domestic businesses as well as keep the bilateral connection between the countries. The amount varied depending on the item and whether you have the importer license or not. 

Why Tax Matters

First and foremost, tax is a mandatory contribution to the government. In return, they will manage the money to improve their service and provide for their citizens. Most taxes go to infrastructure such as building roads, paying government officials, and funding state-wide decisions.

Tax is crucial because it’s for your benefit. You may not realize it now, but the nice roads, interest rates, and other public facilities are available because of your tax. That is why you must always pay your tax on time.

Being delinquent in paying taxes will only bring more harm than good. You shouldn’t take it lightly as you may need to pay fines that are higher than the tax. However, keep in mind that there is a possibility you are overpaying your taxes. In such cases, you can claim and ask for a refund.  
Taxes can be complicated to learn. You need to know the percentage and how the government cut the tax, and so on. But this is necessary when you want to have complete control of your finance. Knowing how tax works can help you manage your money and plan your investment way.

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