Top Tax Questions Answered- Tax Basics | Vanguard (2024)

FAQs

What are the basic of taxes? ›

Common types of taxes include income, payroll, sales, and property taxes. Income taxes are federal, state, and local taxes that may be collected on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends).

Form 1099-B is used to report sales of stocks, bonds, commodities, mutual fund transactions, etc. Form 1099-INT is issued to a taxpayer who receives $10 or more in interest income from a bank during the year.

Calculating capital gains tax

Note that tax is only owed on capital gains when they are realized or sold. If you hold onto this stock instead of selling it, you have what's termed an unrealized capital gain. No tax would be due on the gain until you sold the asset.

Both forms report income generated by a policy; however, they each report a different type of income. Form 1099-INT is used to report interest credited on certain policy proceeds. Form 1099-R is used to report distributions of qualified funds or non-qualified earnings (gain) that have never been taxed.

A tax base is the total value of all assets, properties, individual income, and corporate income in a certain area or jurisdiction. To calculate the total tax liability, you must multiply the tax base by the tax rate: Tax Liability = Tax Base x Tax Rate2.

A few options to legally avoid paying capital gains tax on investment property include buying your property with a retirement account, converting the property from an investment property to a primary residence, utilizing tax harvesting, and using Section 1031 of the IRS code for deferring taxes.

Capital Gains Tax for People Over 65. For individuals over 65, capital gains tax applies at 0% for long-term gains on assets held over a year and 15% for short-term gains under a year. Despite age, the IRS determines tax based on asset sale profits, with no special breaks for those 65 and older.

For the 2024 tax year, individual filers won't pay any capital gains tax if their total taxable income is $47,025 or less. The rate jumps to 15 percent on capital gains, if their income is $47,026 to $518,900. Above that income level the rate climbs to 20 percent.

In some cases, the amount of tax-exempt interest a taxpayer earns can limit the taxpayer's qualification for certain other tax breaks. The most common sources of tax-exempt interest come from municipal bonds or income-producing assets inside of Roth retirement accounts.

Box 14 of Form W-2 Wage and Tax Statement allows your employer to enter a variety of information. Employers might use abbreviations and codes in Box 14, and you may need to ask your employer to interpret those abbreviations or codes.

Do I have to file a 1099-INT if under $600? ›

File Form 1099-INT, Interest Income, for each person: To whom you paid amounts reportable in boxes 1, 3, or 8 of at least $10 (or at least $600 of interest paid in the course of your trade or business described in the instructions for Box 1.

Simply put, taxes are the sum of money paid to the government to collectively fund spending towards public goods and services. Taxes are used to fund things like schools, roads, and various public programs, such as Social Security and Medicare.

Taxes also fund programs and services that benefit only certain citizens, such as health, welfare, and social services; job training; schools; and parks.

It's $29,200 if you're a surviving spouse or you're married and you're filing jointly. If you're the head of your household, it's $21,900. For 2023, the federal standard deduction for single filers was $13,850, for married filing jointly it was $27,700 and for the head of household filers, it increased to $20,800.