USA Tax Laws and Regulations

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USA Tax Laws

Dealing with tax, payroll, and employment regulations for your staff from overseas is a tricky process. The US is no exception, with fines, sanctions and other penalties applying for not complying with the complex and many-layered aspects of taxation. Global expansion is a great way to grow your business and the USA offers many appealing opportunities. However, the tax laws can be complex and require time-consuming research. By using our PEO-service we will take care of the complicated legwork so that you can focus on your business goals in America.

We have made it our goal to keep track of the latest changes in tax policies to always ensure complete compliance. To keep you informed and updated too we created this guide which includes the basic facts regarding tax regulations in the US.

Overview of Taxes in the US

  • Individual Income Tax: Seven tax rates applied in 2021. 10% to 37%; within each band different taxable limits apply to individuals, joint-filing couples and “Heads of households”. The Biden Administration’s 2022 budget plan proposed a new top rate for high-earners at 39.6%
  • Social Insurance Taxes: Employers’ and employees’ contribution to OASDI, known as ‘social security tax’ – 6.20%(On first US$142,000) of earnings; Hospital Insurance, known as ‘Medicare’ – 1.45%; Surcharge for individuals earning over US$200,000 and joint filers over US$250,000 – 0.9%
  • Corporate Income Tax (CIT): Federal standard rate – 21.0%. States also apply CIT at varying rates up to 11.0%
  • Withholding Tax (WHT): Dividend interest on US-sourced income for foreign individuals and companies – 30.0%
  • Consumption Tax: Applied by states at varying rates, roughly between 4%-10%
  • Capital Gains Tax: In 2021 long-term gains taxed at US$40,001-US$248,300 – 15.0%; Above US$248,300 – 20.0%.
  • Short-term gains are taxed as regular income within applicable bands

US Individual Tax – Single, Married

US citizens are taxed on their worldwide income, regardless of where they live. They also must pay federal taxes regardless of which state they live in and whether that state also imposes individual income taxes. The tax year begins on January 1 with returns filed by April 15 of the following year. Here are the following rates for individuals, married joint returns, and the head of families:

Income Tax: Individuals (US$)

  • Up to 9,950 – 10%
  • 9,951 – 40,525 – 12%
  • 40,526 – 86,375 – 22%
  • 86,376 – 164,925 – 24%
  • 164,926 – 209,425 – 32%
  • 209,426 – 523,600 – 35%
  • 523,601 or more – 37%

Married Joint Returns (US$)

  • Up to 19,900 – 10%
  • 19,901 – 81,050 – 12%
  • 81,051 – 172,750 – 22%
  • 172,751 – 329,850 – 24%
  • 329,851 – 418,850 – 32%
  • 418,851 – 628,300 – 35%
  • 628,301 or more – 37%

Head of Family (US$)

  • Up to 14,200 – 10%
  • 14,201 – 54,200 – 12%
  • 54,201 – 86,350 – 22%
  • 86,351 – 164,900 – 24%
  • 164,901 – 209,400 – 32%
  • 209,401 – 523,600 – 35%
  • 523,601 or more – 37%

* The Biden Administration’s 2022 budget plan proposed a new top bracket of 39.6%. This would apply to joint-filing married couples with a taxable income exceeding US$509,300 and individuals with more than US$452,000 in taxable income.