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What is the Total Income Tax in Phoenix?

Man computing tax income

As a business owner, it's important to understand the total income tax in Phoenix in order to properly calculate expenses and operate your business effectively. In this blog post, we'll break down the various taxes businesses must pay in Phoenix and provide information on navigating them.

State Income Tax

Arizona is one of seven states with no state income tax. This means that businesses in Phoenix do not need to pay state income taxes on their earnings. However, it's important to note that businesses may still be subject to other taxes, such as sales tax and property tax.

Federal Income Tax

All businesses in Phoenix are required to pay federal income tax on their earnings. The amount of federal income tax that a business owes is based on its taxable income, which is calculated after deductions and credits are taken into account. The federal income tax rate varies depending on the business's taxable income, ranging from 10% to 37%.

Social Security and Medicare Taxes

In addition to federal income tax, businesses in Phoenix must also pay Social Security and Medicare taxes. These taxes are collectively known as payroll taxes and are based on employee wages or salaries. The current Social Security tax rate is 6.2%, and the Medicare tax rate is 1.45%. Employers are responsible for matching these taxes, meaning they must pay an additional 6.2% and 1.45%, respectively.

Sales Tax

One of the most significant taxes businesses in Phoenix must pay is sales tax. The sales tax rate in Phoenix is currently 8.6%, which includes a state tax of 5.6% and a local tax of 3%. This means businesses must charge customers sales tax on their products or services and remit those taxes to the state and local governments. It's important to note that some products and services, such as groceries and prescription drugs, are exempt from sales tax.

Property Tax

Finally, businesses in Phoenix may also be subject to property tax. This tax is based on the assessed value of any real estate that the business owns, including land, buildings, and equipment. The property tax rate in Phoenix varies depending on the location of the property and can be as high as 1.1%. Businesses must pay property taxes annually. However, many businesses choose to factor the cost of property taxes into their pricing strategy, meaning that their customers effectively end up paying the tax.

Navigating Taxes in Phoenix

Managing taxes can be a daunting task for any business owner. It's essential to have a solid understanding of the various tax requirements and deadlines in order to avoid penalties and fines. Here are a few tips for navigating taxes in Phoenix:

Stay up to date on tax regulations and changes: Tax laws and regulations are subject to change, so it's crucial to stay up to date on any updates that may affect your business. Follow trusted sources for tax news and information, and consult with a tax professional if you're unsure about any aspects of your tax obligations.

Keep clean and organized records: Accurate records are essential for filing taxes and managing your business finances. Consider investing in reliable bookkeeping or accounting software, and work with a tax professional to ensure that your records are accurate and complete.

Understand deadlines and requirements: Each tax has its own set of deadlines and requirements. Ensure you understand when taxes are due and what information you must provide. Late payments or incorrect filings can result in fines and penalties, so staying on top of these deadlines is essential.

Contact Duran Business Group

At Duran Business Group, we understand the challenges that business owners face when it comes to managing taxes. Our team of experienced professionals can help you navigate tax regulations and requirements, ensuring that you're in compliance and making the most of any available tax deductions and credits.

Contact us today to schedule a consultation and learn more about how we can help you with your tax needs. From tax planning and preparation to audits and compliance, Duran Business Group is your partner in success.