Which Types of Income Tax Do People Pay

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Meta Description: Most people pay 4 types: federal income tax (10%-37%), state income tax (0%-13.3%), FICA (7.65% employee/15.3% self-employed), and SDI where applicable.

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      "text": "FICA (Federal Insurance Contributions Act) tax funds Social Security and Medicare. Employees pay 6.2% for Social Security (up to $176,100 wage base in 2025) and 1.45% for Medicare (no wage limit). Employers match these amounts. Self-employed individuals pay both portions, totaling 15.3%, but can deduct the employer half."
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H1

Types of Income Tax People Pay: Complete Guide

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ANSWER SECTION

Most people pay four types of income tax: (1) Federal income tax (progressive rates from 10% to 37%), (2) State income tax (varies from 0% to over 10% depending on location), (3) FICA taxes (Social Security and Medicare at 7.65% for employees, 15.3% for self-employed), and (4) State Disability Insurance (SDI) in certain states (California, New York, Hawaii, Rhode Island, New Jersey). Each tax serves different purposes and applies to different income types.

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H2: Federal Income Tax

The largest tax for most Americans, calculated using progressive brackets:

2025 Federal Tax Brackets (Single):

• 10%: $0 - $11,925
• 12%: $11,926 - $48,475
• 22%: $48,476 - $103,350
• 24%: $103,351 - $197,300
• 32%: $197,301 - $250,525
• 35%: $250,526 - $626,350
• 37%: Over $626,350

Key Form: Form 1040 (U.S. Individual Income Tax Return)

Withholding: Employers withhold based on your W-4. You settle the difference when filing—refund if overpaid, bill if underpaid.

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H2: State Income Tax

No state income tax (9 states): Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming

Flat tax states: Colorado, Illinois, Indiana, Massachusetts, Michigan, North Carolina, Pennsylvania, Utah

Progressive tax states: California (1% - 13.3%), New York (4% - 10.9%), New Jersey (1.4% - 10.75%), Hawaii (1.4% - 11%)

Local taxes: Some cities add income tax (NYC, Yonkers, several Ohio and Pennsylvania cities)

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H2: FICA Tax (Social Security and Medicare)

Employee contribution: 7.65% of wages

• Social Security: 6.2% (wage base limit: $176,100 for 2025)
• Medicare: 1.45% (no wage limit)
• Additional Medicare: 0.9% on wages over $200,000 (single) / $250,000 (married)

Employer contribution: 7.65% match

Self-employed: 15.3% total (both portions), but can deduct the "employer half" (7.65%)

Key Form: W-2 (shows FICA withheld), Schedule SE for self-employed

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H2: State Disability Insurance (SDI)

Five states require employee-funded disability insurance:

California (CA SDI):

• Rate: 1.1% of wages (2025)
• Wage cap: $153,164
• Maximum annual contribution: ~$1,685

New York (NY PFL/DBL):

• PFL rate: 0.373% of wages
• Cap: Statewide average weekly wage

New Jersey, Hawaii, Rhode Island:

• Similar programs with varying rates

Key point: SDI is separate from unemployment insurance and provides benefits for non-work-related disabilities.

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H2: Related Tax Questions

For details on Medicare tax specifically, see our what is Medicare tax guide with rates and thresholds.

Learn about California's disability program in our SDI tax page covering rates and eligibility.

For information on taxes affecting retirees and those with disabilities, review our what type of tax for retired people guide.

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