Do I need to pay US income tax on foreign (UK) earned income?

Do people need to pay state income tax for their federal income tax?

• For example, if a person earns $100K annually and he has to pay 25K out of the 100K as federal income tax. Then will the state income tax charge based on the 100K or on the remaining 75K. One further question is, if person spend 30K in the state and already paid the state sales tax for the 30K, say $3K. Should this $3K be removed from the $100K federal tax base and state income tax base? I'm wondering, does a tax get charged on another paid tax amount? Thanks.

• Answer:

  Generally, the same income base is used to compute both Federal taxes and state taxes. Some states also include deferred income such as 401(k) contributions in taxable income, which would make the taxable income base higher in those states than it is on the Federal level. The Federal government allows a deduction for either state income taxes paid or state sales taxes (where the state does not have a state income tax) if you itemize deductions, which mitigates the double taxation issue to some extent. The standard deduction on the Federal level is set at a level which is intended to account for the amount that people typically pay in state taxes, so that helps to mitigate the double taxation issue when you do not itemize.