Direct Taxes

What are Direct Taxes?
 

A direct tax is paid directly to the institution that imposed it. 

Individual taxpayers, for example, pay direct taxes to the government for a variety of reasons, such as income tax, real estate tax, personal property tax, and asset taxes.

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Types of Direct Taxes:

• Income Tax 

It is determined by one's income. Depending on how much a worker earns, a percentage of his or her pay is deducted. The government is also keen on publicising credits and deductions that help reduce one's tax liabilities, which is a positive thing.

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• Transfer Tax

The estate tax is the most common type of transfer tax. This tax is imposed on the taxable portion of a deceased person's property, which includes trusts and financial accounts. A gift tax is another type of tax that collects a particular amount from persons who are giving property to another person.

 

• Entitlement Tax

People benefit from social programmes like Medicare, Medicaid, and Social Security because of this form of direct tax. The Federal Insurance Contributions Act is the umbrella term for the entitlement tax, which is collected through payroll deductions.

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• Property Tax

Property taxes are levied on real estates, such as land and buildings, and are used to fund public services such as police and fire departments, schools and libraries, and roads.

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• Capital Gains Tax

When an individual sells assets such as stocks, real estate, or a business, they must pay this tax. The tax is calculated by calculating the difference between the purchase price and the selling price.