The American tax system is confusing—even for Americans. This guide breaks it down in simple language.
1. Types of Taxes Americans Pay
Federal Taxes
Paid to the U.S. government.
State Taxes
Not all states have income tax (e.g., Texas, Florida).
Local Taxes
Some cities charge extra.
2. What Is Taxable Income?
Includes:
- Salary
- Business income
- Freelancing income
- Rental income
- Investment gains
3. Standard Deduction
For 2025:
- Single: ~$14,800
- Married filing jointly: ~$29,600
This reduces your taxable income.
4. Tax Brackets
USA uses a progressive system.
The more you earn, the higher your rate—but only for the extra portion.
5. Tax Credits
These directly reduce your tax bill:
- Child Tax Credit
- Earned Income Tax Credit
- Education Credit
- Clean energy credits
6. Filing Taxes
Most Americans use:
- TurboTax
- H&R Block
- CPA/Accountant
7. Avoiding IRS Problems
- Report all income
- Keep receipts
- File every year
- Pay on time