Tax Law
Federal and state income tax, corporate tax, estate tax, and tax controversies.
Overview
Tax law governs the assessment and collection of taxes by federal, state, and local governments. The Internal Revenue Code (Title 26 of the U.S. Code) is the primary federal tax statute, administered by the Internal Revenue Service (IRS). The code addresses individual income tax, corporate tax, estate and gift tax, excise taxes, employment taxes, and tax-exempt organizations.
The U.S. employs a progressive income tax system where rates increase with income. Key concepts include gross income, adjusted gross income (AGI), deductions (standard and itemized), credits, and taxable income. The Tax Cuts and Jobs Act of 2017 (TCJA) significantly reformed the tax code by lowering individual and corporate rates, increasing the standard deduction, limiting state and local tax (SALT) deductions, and modifying business deductions.
Tax planning and compliance involve understanding complex rules around investments, business income, retirement accounts, real estate, and international transactions. Tax controversies — disputes with the IRS — can be resolved through audits, appeals, Tax Court litigation, or other judicial forums. Tax law is one of the most technical and frequently changing areas of law, with new legislation, regulations, and IRS guidance issued regularly.
Key Statutes
Internal Revenue Code
26 U.S.C. § 1 et seq.
The comprehensive federal tax statute covering income tax, estate tax, gift tax, excise taxes, and tax administration.
Tax Cuts and Jobs Act
Pub. L. 115-97 (2017)
Major tax reform lowering individual and corporate rates, modifying deductions, and changing international tax rules.
Employee Retirement Income Security Act (ERISA)
29 U.S.C. § 1001 et seq.
Governs employer-sponsored retirement and health benefit plans, including tax-advantaged treatment of qualified plans.
Foreign Account Tax Compliance Act (FATCA)
26 U.S.C. §§ 1471-1474
Requires foreign financial institutions to report information about U.S. account holders to the IRS.
Key Cases
Commissioner v. Glenshaw Glass Co.
348 U.S. 426 (1955)
Defined gross income broadly as 'all accessions to wealth, clearly realized, over which the taxpayer has dominion,' establishing the foundation for modern income tax law.
Gregory v. Helvering
293 U.S. 465 (1935)
Established the economic substance doctrine, allowing the IRS to disregard transactions that lack business purpose beyond tax avoidance.
Wayfair v. South Dakota
585 U.S. 162 (2018)
Overturned the physical presence requirement for sales tax collection, allowing states to require online retailers to collect sales tax.
Key Regulations
Treasury Regulations (26 C.F.R.)
Department of the Treasury
Comprehensive regulations interpreting and implementing the Internal Revenue Code.
IRS Revenue Rulings and Procedures
Internal Revenue Service
Official IRS guidance on the application of tax law to specific factual situations.
IRS Chief Counsel Memoranda
Internal Revenue Service
Internal legal analysis and advice from the IRS Office of Chief Counsel on tax law issues.
Common Forms
Frequently Asked Questions
What is the difference between a tax deduction and a tax credit?
A tax deduction reduces your taxable income (e.g., a $1,000 deduction saves you $220 if you're in the 22% bracket). A tax credit directly reduces your tax owed dollar-for-dollar (e.g., a $1,000 credit saves you exactly $1,000). Credits are generally more valuable than deductions of the same amount. Some credits are refundable, meaning you receive the excess even if you owe no tax.
When should I itemize vs. take the standard deduction?
You should itemize when your total itemized deductions (mortgage interest, state/local taxes up to $10,000, charitable contributions, medical expenses above 7.5% of AGI) exceed the standard deduction ($14,600 for single filers, $29,200 for married filing jointly in 2024). The TCJA's higher standard deduction means fewer taxpayers benefit from itemizing.
What triggers an IRS audit?
Common audit triggers include high income, large deductions relative to income, unreported income (flagged by W-2/1099 matching), home office deductions, large charitable contributions, business losses, foreign accounts, and cryptocurrency transactions. The overall audit rate is low (less than 1% of returns), but certain categories face higher scrutiny.
Recent Developments
Tax law continues to evolve with debates over extending or modifying provisions of the Tax Cuts and Jobs Act, many of which are set to expire. The IRS has received significant additional funding for enforcement and modernization. Cryptocurrency taxation has become a major focus, with the IRS requiring digital asset transaction reporting. International tax reform under the OECD's Pillar Two framework (global minimum tax) is affecting multinational corporations, and states are increasingly adopting pass-through entity tax elections as workarounds for the SALT deduction cap.
State Variations
State tax systems vary enormously. Seven states (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming) have no state income tax. State income tax rates range from flat rates (like Illinois at 4.95%) to highly progressive systems (California top rate 13.3%). States also differ in their treatment of retirement income, sales tax rates and exemptions, property tax systems, and estate/inheritance taxes. Some states conform to the federal tax code while others maintain independent tax systems.