What Common Taxes Do People Pay Besides Income Tax?

While federal and state income taxes capture the most attention, they represent only one facet of the tax landscape. A broad spectrum of other taxes are imposed by federal, state, and local governments. These levies are tied not just to what a person earns, but also to their spending, property ownership, and wealth transfers. These financial obligations are triggered by different transactions, each with its own rules and rates, and the revenue funds public services that directly impact communities.

Payroll Taxes

An employee’s paycheck is subject to federal payroll taxes governed by the Federal Insurance Contributions Act (FICA). These taxes are distinct from income taxes and fund Social Security and Medicare. FICA taxes are a shared responsibility, with both the employee and employer contributing funds directly to the government.

The FICA tax has two components. The first is the Social Security tax, with a 2025 employee tax rate of 6.2% on earnings. This tax applies only up to an annual income limit, or wage base, of $176,100 for 2025. Any wages earned above this amount are not subject to the Social Security tax for the rest of the year.

The second component is the Medicare tax, which helps fund the nation’s health insurance program for seniors and certain disabled individuals. The employee tax rate for Medicare is 1.45%. Unlike Social Security, there is no wage base limit for the Medicare tax, so it applies to all of an employee’s covered wages.

High-income earners are subject to an Additional Medicare Tax of 0.9% on wages exceeding certain thresholds based on filing status. For example, an individual earning over $200,000 will have this tax withheld once their income crosses that threshold. This additional tax is paid only by the employee, with no employer match.

Consumption Taxes

Taxes on consumption are paid during the purchase of goods and services. The most common form is the sales tax, a percentage-based tax applied to the sale price of many goods and some services. Sales tax rates vary considerably between states and also between cities and counties within the same state.

A related levy is the use tax, which is a counterpart to the sales tax. It applies to taxable items purchased from out-of-state sellers, such as through online catalogs, where no local sales tax was collected. The consumer is responsible for calculating and remitting the use tax to the state, which ensures that local businesses are not at a competitive disadvantage.

Another category is the excise tax, imposed on specific goods or services and often built directly into the retail price. Both the federal government and states levy excise taxes on a range of items, including:

• Gasoline (a federal tax of 18.4 cents per gallon)
• Cigarettes (a federal tax of $1.01 per pack of 20)
• Alcoholic beverages
• Airline tickets

States add their own excise taxes on top of these federal amounts. For instance, air travel is subject to a 7.5% tax on the ticket price plus a domestic segment fee of $5.20 for each takeoff and landing in 2025.

Property Taxes

Property taxes are a cornerstone of local government finance, providing funding for public services that directly benefit the community. The most prevalent type is the real property tax, which is levied on immovable property such as land and the buildings on it. This tax applies to homeowners and owners of commercial real estate alike.

A local government official, or assessor, determines the market value of the property. This assessed value is then multiplied by a tax rate to calculate the final tax bill. This rate is often expressed as a millage rate, where one mill is equivalent to $1 for every $1,000 of assessed value.

The revenue from real property taxes is dedicated to local needs, funding public school districts, police and fire departments, and the maintenance of infrastructure like roads and parks. Because these taxes are tied to local property values and community budgets, the amounts can vary significantly from one jurisdiction to another.

While real estate is the most common subject of property tax, some jurisdictions also levy taxes on valuable personal property, most frequently motor vehicles. This tax is often collected as part of the annual vehicle registration process. The amount of the tax can be based on factors such as the vehicle’s value, age, or weight.

Wealth Transfer Taxes

Wealth transfer taxes are levied on assets passed from one individual to another. Due to high exemption amounts, these taxes affect a small portion of the population. The main forms are the estate tax, inheritance tax, and gift tax.

The federal government imposes an estate tax on the value of a person’s assets after death, before distribution to heirs. An estate is subject to this tax only if its value exceeds the federal exemption of $13.99 million per individual for 2025. A few states also impose their own estate tax, often with lower exemption amounts.

An inheritance tax is distinct from an estate tax, as it is levied on the assets received by a beneficiary, not on the estate itself. There is no federal inheritance tax; it is imposed only by a handful of states. The tax rate depends on the heir’s relationship to the decedent, as closer relatives typically pay a lower rate or are exempt.

The gift tax applies to the transfer of property to another person for less than equal value. It exists to prevent people from avoiding the estate tax by giving away assets before death. An annual gift tax exclusion allows individuals to give up to $19,000 per recipient in 2025 tax-free. Gifts exceeding this amount may require filing a gift tax return, though tax is not owed until the lifetime gift and estate tax exemption is used.