Understand how tax laws work, how they affect the economy, and the ways in which they can be used to achieve fiscal and social goals.

IRS Building in Washington
A Brief History of Taxes in the U.S.

Frequently Asked Questions

  • Do nonprofit organizations pay taxes?

    Nonprofits that meet IRS criteria are exempt from federal taxes, as well as from property and sales taxes. They do pay payroll taxes and may owe taxes on activities that are not part of their nonprofit goals, such as selling products in a museum gift shop.

    Learn More: Do Nonprofit Organizations Pay Taxes?
  • What makes Delaware a tax shelter?

    Delaware is a tax shelter because it has business-friendly usury laws and light taxation, and because companies incorporated there don’t have to conduct their business in Delaware. Delaware also has a separate court system for corporate litigation.

    Learn More: Why Delaware Is Considered a Tax Shelter
  • Does setting tariffs protect domestic industries?

    Tariffs are meant to protect domestic industries by putting taxes on imported products made by foreign competitors to make them cost more. They can also erode competitiveness in the protected industry.

    Learn More: How Do Tariffs Protect Domestic Industries?
  • Where do tax havens get revenue?

    Most governments get revenues through taxation. Tax havens, however, rely on customs and import duties, corporate registration and fees, and departure (airport) taxes on travelers.

    Learn More: 3 Ways Tax Haven Governments Make Money
  • How does the IRS find out that someone is cheating on their taxes?

    Computer data analysis is the key tool—using its own Information Returns Processing system, plus medical records, credit card transactions and other electronic information, including, possibly, social media postings.

    Learn More: How the IRS Catches Tax Cheats and Liars
  • Who has to worry about the chicken tax?

    Hint: It isn’t chickens. Or chicken farmers. The chicken tax is a 25% tariff on light truck imports originally imposed in 1963 to retaliate against European tariffs on American chicken. It still exists.

    Learn More: Chicken Tax

Key Terms

  • Taxation

    Taxation is a fee required to be paid to a government by citizens, businesses. It can also be imposed on physical assets, such as property, and on transactions, such as the sale of a home or stock. Types of taxes include income, corporate, capital gains, property, inheritance, and sales.

    Learn More
  • Value-Added Tax

    VAT is a consumption tax added to goods and services at every point of the supply chain, from initial production to point of sale.

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  • Double Taxation

    This is when income tax is paid twice on the same source of include, such as when stock dividends are taxed both at the corporate level and the personal level—or when the same income is taxed by two different countries.

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  • Kiddie Tax

    This is a special tax law created in 1986 to address investment and unearned income tax for individuals 18 or under or dependent full-time students under age 24.

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  • Tax-Advantaged

    This refers to favorable tax status given to certain qualified investments, accounts, or other financial vehicles. Common examples: municipal bonds, partnerships, and annuities, as well as retirement plans such as 401(k)s and IRAs.

    Learn More
  • SALT (State and Local Tax)

    This acronym stands for state and local tax and is generally associated with the federal income tax deduction for state and local taxes available to taxpayers who itemize their deductions.

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  • Goods and Services Tax (GST)

    This tax on goods and services sold domestically is added to the cost of the product at the point of sale and is remitted to the government by the seller.

    Learn More
Man doing his taxes
State and Local Tax (SALT): Definition and How It's Deducted
Shredded US one dollar bill.
Worthless Securities: Meaning, Overview, FAQ
Good and Services Tax
Goods and Services Tax (GST): Definition, Types, and How It's Calculated
Regressive Tax: A tax that is applied uniformly regardless of income.
Regressive Tax: Definition and Types of Taxes That Are Regressive
Taxation
Understanding Taxation: Definitions, Justifications, and Types
Container Cargo Ship and Cargo Plane With Working Crane Bridge in Shipyard at Sunrise
Section 232 of the Trade Expansion Act: What It Is and How It Works
Calculator and tax forms
Understanding Section 1250: Taxation of Depreciated Real Property
A person seated at a desk looking at investment charts and taking notes.
How Are ETFs Taxed?
State corporate tax rates in the United States (2017-19)
Understanding the Throwback Rule in State Corporate Taxation
Oil: A Big Investment with Big Tax Breaks
Luxury yacht in the Maldives, Soneva in Aqua
Understanding Ability-to-Pay Taxation: A Progressive Tax Principle
Double Taxation: Being taxed twice on the same source of income.
What Is Double Taxation?
Economist and reporters meet in small groups outside a conference room where the Bureau of Economic Analysis will release GDP data.
Understanding the Optimal Tax-to-GDP Ratio for Economic Growth
Senior man working in a greenhouse
Understanding EGTRRA's Impact on Taxes and Retirement Plans
Foreign Account Tax Compliance Act (FATCA): A law that requires foreign financial institutions to report on the assets held by US account holders.
Foreign Account Tax Compliance Act (FATCA): Key Rules and Compliance
Bob Dole
Tax Equity and Fiscal Responsibility Act (TEFRA) Explained
Two people at a computer at work
How to Avoid Violating Wash Sale Rules When Realizing Tax Losses
What To Know About Tax-Advantaged Accounts
Tax-Advantaged Accounts: Maximize Your Savings and Reduce Taxes
Generation-Skipping Transfer Tax (GSTT): A federal tax that applies when gifting assets to someone two or more generations younger.
What Is the Generation-Skipping Transfer Tax (GSTT) and Who Pays?
Ronald Reagan Giving Campaign Speech
Understanding the Economic Recovery Tax Act of 1981
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Understanding Pump Priming: Definition and Examples in U.S. and Japan
Workers with shipping containers
Why Do Governments Implement Tariffs?
Federal tax officers discussing about potential sources of tax revenue.
16th Amendment: Definition, What It Does, and Importance
A tax accountant has various tax documents, a calculator, and a laptop spread on their desktop as they calculate taxes for a wealthy client.
Understanding Surtax: Examples, Calculations, and Implications
Business Tax Filing Questions
How Are You Taxed After Selling a Mutual Fund in an IRA?
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Canada Revenue Agency: Understanding How CRA Works and Its Role
Street in City of London with Royal Exchange, Bank of England and new modern skyscrapers, England, UK
Advance Corporation Tax (ACT) Explained: History and Impact on UK Companies
Facade of a government building, Internal Revenue Service building, Washington DC, USA
The Loss Disallowance Rule (LDR): A Guide for Corporate Tax Strategies
Houses, a map and a HMRC Stamp Land Duty Tax form
Understanding the Stamp Duty Land Tax (SDLT): A Guide to Rates and Rules
Ten pound notes
The U.K.'s Tax and Price Index: Maintaining Your Buying Power
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Tax Rules for Nonprofit Organizations: How Tax-Exemption Works
Cigarette
Tobacco Tax/Cigarette Tax: Meaning, Limitations, Pros and Cons
Three wood blocks spelling tax on tax forms
Protecting Americans From Tax Hikes (PATH) Act: Definition
HM Revenue & Customs: Tax Authority of the United Kingdom
People wander around and look at statues in the Old Hall of Representatives in the U.S. Capitol building in Washington, D.C.
Tax Reform Act of 1986: Overview and History
The United States capitol builing on a sunny day.
Fiscal Cliff Explained: Definition, History, and Resolution
Working With Tax Return Form
Understanding the Border Adjustment Tax: Impact on Trade and Investment
Tax Forms, Pencil, and Receipts
Tax Arbitrage: What it Means, How it Works
How LLC's Pay State Income Tax
Understanding Clearance Certificates: Tax Compliance Explained
Harmonized Sales Tax (HST): A federal and provincial sales tax levied on goods and services in Canada.
Harmonized Sales Tax (HST): Definition as Canadian Sales Tax
Business people shaking hands to congratulate success.
MLP vs. LP: Key Differences and Tax Benefits Explained
Cash dividends literally represent money sent to you in the mail or direct deposited into your bank account. The goal of successful investing is to be able to have cash dividends pour into your life regularly so you don't need to work unless you desire.
Accelerated Cost Recovery System (ACRS): Overview and Key Criticisms
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Hidden Taxes: How They Affect Consumer Spending and Budgets
Pick-Up Tax
Understanding the Pick-Up Tax: Shared State and Federal Estate Tax
183-Day Rule: Criteria used by many countries to determine if someone should be considered a resident for tax purposes.
Understanding the 183-Day Rule for Tax Residency
Detail of Capitol Building With Red, White, and Blue Balloons
How Formal Tax Legislation Becomes Law: Key Steps and Impact
Windfall Tax: A surtax imposed by governments on businesses or economic sectors that have benefited from economic expansion.
Windfall Tax Explained: Definition, Purpose & Industry Impact
tax lien
How to Resolve IRS Tax Liens: A Complete Guide
Kiddie Tax: A tax imposed on income unrelated to employment received by individuals 18 years of age or under or dependent full-time students younger than 24.
Understanding Kiddie Tax: Rules and Rates
Corporate executives conduct a meeting.
Understanding Taxable Spinoffs: Process, Tax Implications, and Examples
Words "tax lien" on wooden board
Tax Lien Foreclosure: Process, Key Steps, and Differences from Tax Deed Sales
Four business partners use sticky notes to visualize how production and work will flow after they spin off a portion of the company.
Understanding Tax-Free Spinoffs: Definition and Process
You can use your annual gift tax exemption to lower estate taxes by reducing the value of your estate.
Welfare Loss of Taxation: Overview, Categories
Financial Advisor Planning With Clients at Office
Ability to Pay Principle in Tax Law: Comprehensive Guide & Examples
Understanding Tax Abatement: Benefits, Examples, and How It Works
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Understanding Solidarity Tax: Definition, Operation, and Global Examples
Engineers working together to replace an old pipeline in a residential street, one is checking the pipeline's condition and the other noting down details.
Understanding Special Assessment Tax: Definition, Payees, and Examples
U.S. Bankruptcy Court
Understanding Chapter 9 Bankruptcy: Protections for Municipalities
President Bill Clinton sits at their desk in the oval office and speaks on the phone to congressional members to rally support of the 1997 Taxpayer Relief Act.
Taxpayer Relief Act of 1997 Definition
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Understanding Duty Taxes: Imports, Exports, and Practical Examples
Signing Legislation
Understanding Bilateral Tax Agreements to Avoid Double Taxation