Income taxes are taxes imposed by the government on individuals or corporations based on their income or profits. They are typically calculated as a percentage of the taxpayer's income and are paid to the government annually.
Income taxes are taxes imposed on individuals or entities that vary with their respective income or profits (taxable income). Income tax generally is computed as the product of a tax rate times taxable income. Taxation rates may vary by type or characteristics of the taxpayer.
Income taxes are imposed on individuals or entities by the federal government, most state governments, and many local governments. The federal income tax system is progressive, so the rate of taxation increases as income increases. Most state and local income taxes are flat, meaning that the rate of taxation is the same for all taxpayers regardless of income level.
Income taxes are generally based on the taxpayer’s adjusted gross income (AGI). AGI is the total of all income sources, minus certain deductions and exemptions. The deductions and exemptions are designed to reduce the amount of taxable income and, thus, the amount of taxes owed.
Income taxes are generally paid in two installments. The first installment is due on April 15th of each year and is based on the taxpayer’s income from the previous year. The second installment is due on June 15th and is based on the taxpayer’s income from the current year.
Income taxes are used to fund government programs and services, such as Social Security, Medicare, and national defense. They are also used to fund public infrastructure projects, such as roads and bridges.
Income taxes are a necessary part of the functioning of a modern economy. They provide the government with the funds it needs to provide essential services and infrastructure. They also help to ensure that everyone pays their fair share of taxes, which helps to reduce income inequality.