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Understand the taxes behind the number

Practical guidance for federal income tax, state tax, sales tax, payroll, investments, and business entities — with small planning estimators for early decisions.

The full picture

Income, payroll, and sales tax can all sit on the same sale.

Use this guide before you file or collect. Rules vary by year, state, nexus, filing status, and facts — including sales tax, which is separate from income tax.

Federal income tax

A nationwide progressive tax collected by the IRS.

  • Income is taxed in layers, so moving into a higher bracket does not apply that rate to all income.
  • The standard deduction or eligible itemized deductions reduce taxable income.
  • Most individual income is reconciled annually on Form 1040 after withholding and estimated payments.
Read IRS: Federal income tax rates and brackets

State income tax

State rules sit alongside federal rules and differ by state.

  • Some states, including Texas and Florida, generally do not tax individual wage income.
  • Other states have their own brackets, deductions, credits, filing requirements, and local taxes.
  • Your residence, work location, and income source can affect which state returns are required.
Read Federation of Tax Administrators: State tax agencies

Payroll taxes

Paychecks can include federal income-tax withholding plus FICA.

  • Social Security is generally 6.2% for the employee and 6.2% for the employer, up to the annual wage base.
  • Medicare is generally 1.45% for the employee and 1.45% for the employer, with no wage cap.
  • An additional 0.9% Medicare withholding can apply to employee wages over $200,000.
Read IRS Topic 751: Social Security and Medicare withholding

Capital gains

Investment gains use different rules from ordinary wages.

  • Short-term gains on assets held one year or less are generally taxed at ordinary income rates.
  • Long-term gains may qualify for 0%, 15%, or 20% rates based on taxable income and filing status.
  • Capital transactions are generally reported on Form 8949 and Schedule D; losses have deduction limits.
Read IRS Topic 409: Capital gains and losses

Business entities

The entity type changes how income and payroll taxes flow.

  • Sole proprietors and many single-member LLCs generally report business activity on the owner return, often Schedule C.
  • C corporations generally pay corporate income tax directly; distributions may also be taxed to shareholders.
  • S corporations and partnerships generally pass income through, while owner compensation and payroll treatment require care.
Read IRS: Business structures

Sales tax

A state and local tax on taxable sales, not the same as income tax.

  • Most states require a seller to collect and file sales tax once they have nexus in that state — a physical location or, in many cases, enough remote sales.
  • Rates, taxable goods, marketplace rules, and filing frequency differ by state and sometimes by city or district.
  • Registration, exemption certificates, and on-time returns matter as much as collecting the right amount at checkout.
Read Streamlined Sales Tax: State guidance
Planning tools

Two quick estimates

These tools are for planning only. They do not replace a complete return, withholding calculation, or professional advice.

Employee FICA

See the employee share of Social Security and Medicare on annual wages.

Estimated employee FICA$0Social Security $0 + Medicare $0

Capital gains

Compare an illustrative short-term and long-term federal planning estimate.

Illustrative federal estimate$0Uses a 15% planning rate. Actual rates depend on taxable income and filing status.

Important: Tax laws and thresholds change. The state summary is not a substitute for checking your state revenue department, and the estimates omit credits, deductions, NIIT, AMT, self-employment tax, and other facts.