Tax system in United States
The U.S. is not a single-rate tax country. Federal taxes apply nationwide, but states and localities can add their own income, corporate, sales, property and transfer taxes.
U.S. citizens and resident aliens are generally taxed on worldwide income. Nonresident aliens are usually taxed on U.S.-source income and income effectively connected with a U.S. trade or business.
There is no federal net wealth tax and no federal inheritance tax. Instead, the U.S. uses a federal estate-and-gift tax system, and some states add their own estate or inheritance taxes.
Tax rates at a glance
- Income tax
- 10% - 37%Federal
- Corporate tax
- 21%
- Capital gains tax
- 0% - 20%
- Estate tax
- Up to 40%
- Wealth tax
- 0%
- Sales tax
- Varies by state
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
EmployeesFoundersInvestorsExpatsLarge businesses
Watch out for
- Federal and state rules can point in different directions. A good federal answer is not always a good state answer.
- State and local taxes can change the outcome materially, especially for people who move, own property or run businesses across multiple states.
- U.S. citizens and resident aliens are usually taxed on worldwide income even if they live abroad.
- Entity choice matters: LLCs, partnerships, S corporations and C corporations are taxed very differently.
Frequently asked questions
Is the U.S. a high-tax country?
It is not low-tax overall because federal, state and payroll taxes stack. The result depends heavily on where you live and how your income is earned.
Does the U.S. have a wealth tax or inheritance tax?
No federal wealth tax and no federal inheritance tax. The federal system uses estate and gift taxes instead, and some states add their own transfer taxes.
Do state taxes matter?
Yes, often a lot. Residence, source rules and local taxes can change the answer completely.