The United States is a land of opportunity for international registered nurses and medical technologists. There are plenty of things to do and explore whilst working towards your personal and professional goals. While there are many positives to discover as a United States Green Card holder, one aspect of being a U.S. citizen is taxes. In this article, we give a brief explanation of America’s tax system, so that you can better understand and manage your future obligations.
Understanding U.S. taxes
In the United States, taxes are imposed at the federal, state, and sometimes local levels. The two main types of taxes are income taxes and consumption taxes.
Income taxes are imposed on individuals' earnings. This includes wages, salaries, and investment income. The federal government collects income taxes through the Internal Revenue Service (IRS). Tax rates vary depending on income level, with higher earners typically paying a higher percentage of their income in taxes.
Consumption Taxes are imposed on goods and services. The most common consumption tax is sales tax, which varies from state to state and sometimes from locality to locality.
What is tax money used for?
Income taxes fund various government programs and services, including national defense, healthcare, education, infrastructure, and social welfare programs like Social Security and Medicare.
Consumption taxes, such as sales tax, contribute to state and local government budgets and finance public services like schools, roads, and public safety.
Government use of tax money
Taxes are the primary source of revenue for the government, and they are used to fund essential public services and infrastructure. Here's a breakdown of how tax money is typically allocated:
Social Security and Medicare: These programs provide retirement benefits and healthcare services to eligible individuals, primarily funded through payroll taxes.
Defense: A significant portion of federal taxes goes towards national defense, including funding for the military, homeland security, and veteran benefits.
Healthcare and Social Services: Federal and state governments allocate funds for Medicaid, food assistance programs, housing assistance, and other social welfare programs to support vulnerable populations.
Education: Taxes help fund public schools, colleges, and universities, ensuring access to quality education for all citizens.
Infrastructure: Tax dollars finance the construction and maintenance of roads, bridges, public transportation, and other essential infrastructure projects.
Variations in taxes across states
One of the unique aspects of the U.S. tax system is that tax rates and regulations can vary significantly from state to state. Some states have no income tax, while others have a progressive income tax system with multiple tax brackets. Additionally, states have different sales tax rates, ranging from zero to over 10%.
States also have the authority to levy additional taxes, such as property taxes, gasoline taxes, and excise taxes on specific goods like tobacco and alcohol. These variations make it essential for new immigrants to research and understand the tax laws in their specific state of residence.
Do I have to pay tax as a new U.S. resident?
Yes, you do. If you don’t pay the full tax that is due in the state you live in, you can be liable to financial penalties or even legal action. You will need to file federal income tax returns and pay any tax owed annually, usually around mid-April. We recommend you work with a professional who understands the system so that you can best understand the process and what is required.
Navigating U.S. taxes as a new immigrant may seem overwhelming at first, but with patience and understanding, it will become manageable. By familiarizing yourself with the types of taxes, what they fund, and the variations across states, you can effectively fulfill your tax obligations while enjoying the benefits of living in the United States. Remember, seeking guidance from tax professionals or utilizing online resources can provide invaluable assistance in navigating the complexities of the U.S. tax system.
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