Special & State Taxes

A tax covering the Social Security and Medicare contributions normally split between an employer and employee, which self-employed people must pay in full. It totals 15.3% of net earnings, made up of 12.4% for Social Security and 2.9% for Medicare, with an extra 0.9% Medicare tax on higher incomes. It is reported using Schedule SE, and half of it can be deducted from your taxable income.

A state-level tax that some beneficiaries pay when they receive assets from someone who has died, which can include cash, real estate, investment accounts, and personal property. The key feature is that the person receiving the inheritance pays it, unlike an estate tax, which is paid by the estate before assets are distributed. There is no federal inheritance tax, and as of 2024 to 2025 only five states impose one.

A tax imposed by a state government on income earned by individuals, and in some cases estates or trusts. Because each state writes its own rules, systems vary widely: some states have no broad individual income tax, others use a single flat rate, and many apply graduated brackets that rise with income. This is why two people with the same income can owe very different amounts depending on where they live and work.

The Social Security portion of FICA, a federal payroll tax that funds retirement, survivor, and disability benefits. In 2026, W-2 employees pay 6.2% of covered wages up to a $184,500 wage base (employers match it, and self-employed workers pay 12.4%). On a paystub it often appears as FED OASDI/EE, meaning the employee share of federal Social Security tax.

A tax-free insurance exchange that lets you move cash value from an old life insurance policy, annuity, or endowment contract into another qualifying contract without immediately paying income tax on unrealized gains. Only certain directions qualify, such as life insurance to annuity, while annuity to life insurance generally does not. It is meant to improve your coverage, since surrender charges, policy loans, and fresh surrender periods can outweigh the tax benefit.

A federal income tax deduction for qualified overtime compensation, not a promise that overtime disappears from every tax calculation on your paycheck. The deductible portion is generally the premium above your regular rate (the “extra half” of time-and-a-half), and it applies to tax years 2025 through 2028. Payroll taxes and possibly state taxes may still apply, and it phases out at higher incomes. =