Do you pay your taxes? When you just read that were you thinking about the money that comes out of your paycheck? You are probably taxed way more than you think.
Here are some of the types of taxes that you might have to pay.
Federal Income Tax
Income tax is the tax that most of us are most familiar with. This comes out of our paychecks. This is for many the largest component of what we pay in taxes. Income tax is the tax on new money that comes to us, either from working, net profits from our company, or passive income like interest or dividends.
State Income Tax
We also pay income tax at the state level. That is to say that in addition to paying income tax to the federal government, we also pay income tax to our state as well. Some local governments even collect local income tax.
Capital Gains Tax
If you buy property and then sell that property for more than you paid for it, you will owe capital gains taxes on the gain. For example, if you buy an investment for $100 and sell it for $150, you will owe capital gains taxes on the gain of $50.
If you own property, you will owe a percentage of the value of your property to the government. This tax is often ignored or at least misunderstood when people think about mortgages locking in their payment for 30 years. Mortgages lock in principal and interest payments, but if the value of your home goes up, your property taxes go up.