State and Local Tax Law (2024)

FAQs

What is local tax law? ›

A local tax is an assessment by a state, county, or municipality to fund public services ranging from education to garbage collection and sewer maintenance. Local taxes come in many forms, from property taxes and payroll taxes to sales taxes and licensing fees.

The SALT tax deduction allows taxpayers who itemize to deduct certain state and local taxes to reduce their federally taxable income by as much as $10,000.

Income tax - The amount of state and local income tax you pay will depend on how much income you earn and the tax rate of the state or locality where you live. Currently, 41 states collect income tax on salary and wages. Personal property tax - You may have to pay taxes based on the value of your personal property.

A discussion of taxes frequently refers to the national federal tax system. However, states also have their own tax codes and regulations that can be just as important for individuals and businesses.

You can only go to jail for not paying your taxes if criminal charges are filed and you are prosecuted and sentenced in a criminal proceeding. Criminal tax violations are clearly outlined in the tax code and criminal tax charges can only be brought for violations of those provisions.

Taxpayers in all 50 states and the District of Columbia pay property taxes, but the tax on real property is primarily levied by local governments (cities, counties, and school districts) rather than state governments. With a few exceptions, states typically levy taxes on personal property.

State and local taxes are taxes imposed by a state, county, or municipality to raise revenue to fund public services such as education, trash collection, etc.

Taxpayers who itemize deductions on their federal income tax returns can deduct state and local taxes--specifically property taxes plus either income taxes or general sales taxes. However, the Tax Cuts and Jobs Act limits the total state and local tax deduction to $10,000.

State and local general expenditures include spending on schools, health care services, and general administration (among other activities in the general government sector) but exclude government-run liquor stores, utilities, and insurance trusts, which are accounted for separately in the census.

Local taxes can come in a range of forms and they can include sales taxes, licensing fees, payroll taxes, and property taxes, for example.

What is my state and local tax rate? ›

The California state sales tax rate is 7.25%. This rate is made up of a base rate of 6%, plus California adds a mandatory local rate of 1.25% that goes directly to city and county tax officials.

Most states have income taxes, but eight states do not. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington (state) and Wyoming do not collect individual income taxes to fund their state governments.

State and local spending keeps communities running, whether through funding to repair local public schools and pay teachers, run police departments, provide housing subsidies to low-income families, help seniors pay utility bills, or operate other programs.

As of 2023, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are the only states that do not levy a state income tax. Note that Washington does levy a state capital gains tax on certain high earners.

A local tax is a tax levied by a local government on the residents of that area. The tax is usually based on the value of the property, income, or goods and services purchased in the area. The purpose of the tax is to raise revenue for the local government to fund local services such as schools, police, and roads.

Council tax is the local tax which helps councils pay for the services they provide. We use the money collected for council tax to maintain roads and street lighting, for services such as street cleaning and rubbish collection and for things like 'Meals on wheels'.

Only localities in states with state income tax impose a local income tax. As an employer, you must pay careful attention to the local taxes where your employees work. If the tax is a withholding tax, local tax laws require you to withhold the tax from employee wages and remit it.

With federal taxes, the higher your income, the more you pay. But with state and local taxes, the higher your income, the less you pay. As a result, state and local taxes counteract some of the equalizing effects of the federal tax system.