Insidious Taxes Within The US Tax Code

Originally aimed at ensuring the wealthy pay a fair share, it can now impact middle-income taxpayers, particularly those with large deductions or multiple dependents.

Often called the "death tax," it taxes the transfer of a deceased person's estate to their heirs, potentially forcing the sale of family-owned businesses or farms to cover the tax bill.

Federal Insurance Contributions Act (FICA) Tax: Although intended to fund Social Security and Medicare, this tax disproportionately affects lower-income earners, as it is a flat rate with a cap on income subject to the tax.

Capital gains taxes are levied on the sale of an asset that has increased in value. However, part of this increase may simply be due to inflation, leading to taxation on non-existent real gains.

This tax requires self-employed individuals to pay both the employer and employee portions of Social Security and Medicare taxes, significantly increasing their tax burden.

Some married couples end up paying more in taxes than they would if they were single, particularly if both spouses have similar incomes.

Depending on your income, up to 85% of your Social Security benefits can be taxed, effectively taxing a benefit that was funded by your own taxed earnings.

Corporate Double Taxation: Corporate profits are taxed at the corporate level, and then dividends distributed to shareholders are taxed again at the individual level, resulting in double taxation.

State and Local Tax (SALT) Deduction Cap: The Tax Cuts and Jobs Act of 2017 capped the deduction for state and local taxes at $10,000, disproportionately impacting taxpayers in high-tax states.

This occurs when taxpayers are taxed on income they haven't actually received, such as in cases of forgiven debt, where the IRS may treat the forgiven amount as taxable income.