U.S. Income Taxes 2013

(Last updated, June 2013)

Individual Income Tax. The U.S. individual income tax rates 2013 are 10%-39.6%.

However if under the AMT, Alternative Minimum Tax, method the tax payable exceeds the tax payable under the regular income tax method, the AMT calculation is effective.

Tax Rate Schedules for Individuals and Trusts 2013($)

Capital Gains. Capital gains of corporations are added to the regular income. There is a rollover relief for sale of business assets.

For individuals long term capital gain, When holding a qulified capital property more than 12 months (before selling), the tax rate is generally 20%, zero for low income earners, subject to certain conditions.

Short term capital gain is added to ordinary income and is taxed at regular tax rate.

Residence U.S.

A company is U.S. resident if incorporated in the U.S.

Both, resident companies and individuals pay taxes on their worldwide income, with relief given under certain conditions for foreign taxes paid, if any.

Individuals can invest in U.S. resident companies from abroad, but need to apply for a EB5 visa first.

The U.S. Tax Deductions

• Losses are carried forward 20 years. There is a carry back of losses for 2 years under certain terms.
• Consolidated tax returns are allowed under certain terms and limitations, mainly a minimum 80% holding of one subsidiary by the parent company.
• Thin Capitalization-Interest expenses paid to related parties are not allowed when the debt to equity ratio is not substantiated by the payer.

Withholding of Tax at Source

The withholding of tax at source from the following payments to non residents payee is as follows:

Dividend- 30%.

Interest- 30%.

Royalties- 30%.

Income tax treaty with the country of the nonresident may reduce the withholdings.

Social Security

Social Security includes OASDI, Old Age, Survivor Disability Insurance, and Medicare.

The rate of OASDI is 6.2% for employers and 6.2% for employees, up to a ceiling of $ 113,700 for 2013 Medicare tax rate is 1.45% for each ,the employer and the employee.

There is no ceiling for Medicare tax.

Starting 2013 there is an increased 3.8% Medicare tax for higher income individuals on investment income called unearned income Medicare contribution tax.