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  • 1. INCOME TAX IN THE UNITED STATES
  • 2. Section 1 USA TAX FOR INDIVIDUALS
    • Imposition of tax- imposed on each individual as described in sec 2.
    • Taxable income- means adjusted gross income, reduced by:
    • a)the personal and dependency deduction,
    • b)the family living allowance,
  • 3.
    • c)the USA deductions, including
    • -the homeowner deduction,
    • -the education deduction, and
    • -the philanthropic transfer deduction.
    • Adjusted gross income- means gross income reduced by child support deductions and qualified IRA(Individual Retirement Account) deductions.
  • 4. Section 2 Persons liable for tax for individuals
    • Individuals only.
    • Citizens and resident aliens
    • Nonresident aliens
    • Taxpayer- individual & in case of joint return, the husband and the wife.
  • 5. Section 16 Kiddie tax
    • General rule- if a child has a living parent and net unearned income & the child has not attained the age of 14 before the close of the taxable year it will be included in the taxable income of the parent.
    • Child’s share of allocable parental tax.
    • Eligible parent.
    • Net unearned income.
  • 6. Section 121Taxable Year
    • In general- the taxable year for all individuals subject to tax shall be the calendar year.
    • Short taxable years
    • (i) Birth
    • (ii) Death.
  • 7. GROSS INCOME-sec 3
    • Means all income from whatever source derived by a taxpayer during the taxable year including the following:
    • 1. Compensation for services.
    • 2. Fringe benefits.
    • 3. Rents
    • 4. Alimony,child support
    • 5. Gains on the sale of assets etc.
  • 8. EXCLUSION FROM GROSS INCOME-sec 4
    • Gross income does not include:
    • Returns or benefits from previously taxed income-
    • compensation for special kinds of services
    • gratuitous,charitable and government transfers
    • tax-exempt bond interest
    • compensation for injury and sickness
    • benefits primarily for the convenience of the employer and certain fringe benefits
  • 9. CONT……..
    • 7. Repayable receipts
    • 8. Certain income earned abroad
    • 9. Proceeds from sale of principal residence
    • 10. Qualified retirement contributions
  • 10. ALIMONY AND CHILD SUPPORT DEDUCTIONS sec 5
    • Alimony, child support payments paid during the taxpayer’s taxable year.
    • means which is includible in the gross income of the recipient u/s 3.
  • 11. USA DEDUCTIONS sec 8
    • sec 9- home owner deduction
    • Means deduction equal to the amount of interest paid by the taxpayer during the taxable year on acquisition indebtedness with respect to any qualified residence of the taxpayer.
    • Acquisition indebtedness
    • 1. Means incurred in acquiring, construction or improving the residence.
    • 2. Refinance any indebtedness described above.
  • 12.
    • LIMIT:
    • The aggregate amount treated as acquisition indebtedness shall not exceed $1000000($500000 for married individual filing separately)
    • QUALIFIED RESIDENCE
    • means the principal residence of the taxpayer.
  • 13. EDUCATION DEDUCTION-sec 10
    • means deductions equal to the sum of the qualified educational expenses for each eligible student
    • ELIGIBLE STUDENT:
    • Means:
    • Taxpayer
    • taxpayer’s spouse if filed jointly
    • dependent of the taxpayer.
  • 14.
    • LIMITATION:
    • The max. education deduction in a taxable year is $12000( $6000 in the case of married individuals filing returns separately)
  • 15. PHILANTROPHIC TRANSFER DEDUCTION sec 11
    • Shall be the amount of charitable contributions made by the taxpayer in the taxable year.
    • Only to the extent that such contributions do not exceed 50% of the taxpayer’s AGI
    • carry over- if exceeds amt allowed as deduction excess carried over a period of 5 year
  • 16. US TAX RATES
  • 17. MARRIED INDIVIDUALS FILING JOINT RETURNS If taxable income is over-- But not over-- The tax is: $0 $15,650 10% of the amount over $0 $15,650 $63,700 $1,565.00 plus 15% of the amount over 15,650 $63,700 $128,500 $8,772.50 plus 25% of the amount over 63,700 $128,500 $195,850 $24,972.50 plus 28% of the amount over 128,500 $195,850 $349,700 $43,830.50 plus 33% of the amount over 195,850 $349,700 no limit $94,601.00 plus 35% of the amount over 349,700
  • 18. MARRIED INDIVIDUALS FILING SEPARATE RETURNS If taxable income is over-- But not over-- The tax is: $0 $7,825 10% of the amount over $0 $7,825 $31,850 $782.50 plus 15% of the amount over 7,825 $31,850 $64,250 $4,386.25 plus 25% of the amount over 31,850 $64,250 $97,925 $12,486.25 plus 28% of the amount over 64,250 $97,925 $174,850 $21,915.25 plus 33% of the amount over 97,925 $174,850 no limit $47,300.50 plus 35% of the amount over 174,850
  • 19. UNMARRIED INDIVIDUALS If taxable income is  over- But not over-- The tax is: $0 $7,825 10% of the amount over $0 $7,825 $31,850 $782.50 plus 15% of the amount over 7,825 $31,850 $77,100 $4,386.25 plus 25% of the amount over 31,850 $77,100 $160,850 $15,698.75 plus 28% of the amount over 77,100 $160,850 $349,700 $39,148.75 plus 33% of the amount over 160,850 $349,700 no limit $101,469.25 plus 35% of the amount over 349,700
  • 20. HEADS OF HOUSEHOLDS If taxable income is over-- But not over-- The tax is: $0 $11,200 10% of the amount over $0 $11,200 $42,650 $1,120.00 plus 15% of the amount over 11,200 $42,650 $110,100 $5,837.50 plus 25% of the amount over 42,650 $110,100 $178,350 $22,700.00 plus 28% of the amount over 110,100 $178,350 $349,700 $41,810.00 plus 33% of the amount over 178,350 $349,700 no limit $98,355.50 plus 35% of the amount over 349,700
  • 21.
    • GUIDING PRINCIPLES OF USA TAX SYSTEMS
    • National wealth & well-being depend on the work, skill,saving & investments of people.
    • Business are people & their capital working together
    • Capital makes people more productive
    • Everyone benefits from a growing stock of national saving which in turn allows for a growing stock of physical & human capital
  • 22.
    • TAXABLE YEAR FOR A BUSINESS ENTITY
    • Gross profits
    • Annual accounting period
    • Calendar year
    • fiscal year
  • 23. GAIN OR LOSS ON THE SALE OF AN ASSET-SEC.71
    • Gross Income = amount realized from the disposition of property – taxpayer’s adjusted basis in the property.
    • Amount realized is the sum of money received plus the fair market value of the property received.
    • Mark able contract means any regulated futures contract, any foreign currency contract etc…
  • 24. LIMITATION ON LOSSES FROM CAPITAL TRANSACTIONS
    • No loss on personal use property.
    • Losses from sales of exchanges of capital assets in a taxable year shall be allowed.
    • Capital loss carryovers
    • Capital assets
    • Recapture
  • 25. TAX ON NON RESIDENT ALIEN INDIVIDUALS
    • Non-business income
    • - income other than certain gains
    • Capital gains of certain aliens .
  • 26. CONCLUSION
    • In the United States, income tax codes are often legislatures’ favored policy instrument for encouraging numerous undertakings deemed socially useful.
    • Special tax rebates granted for any purpose .
  • 27. INDIAN BUDGET 2008-2009
    • Provisions for taxation
    • Increase limit of Sec 80 C
    • Benefit from home loan
    • Standard deduction
    • Realign tax slabs
  • 28.  
  • 29. EXAMPLE OF A TAX COMPUTATION
    • Income tax:
    • $40,000 (adjusted gross income)
      • $7,825 × 0.10 = $782.50
      • ($31,850 - $7,825) × 0.15 = $3,603.75
      • ($40,000 - $31,850) × 0.25 = $2,037.50
    • Total income tax = $6,423.75 (16.06% of income)