ALL0-9ABCDEFGHIJKLMNOPQRSTUVWXYZ
Share This
Share
« Back to Glossary Index
Categories: General Tax Terms

Income Tax

Income tax is a financial charge imposed by a government on the income earned by individuals and businesses. The tax is typically calculated as a percentage of the taxable income, which can include wages, salaries, dividends, interest, and other forms of earnings.

Income tax is generally progressive, meaning that higher income levels are taxed at higher rates. Taxpayers are required to file an income tax return annually to report their earnings, calculate their tax liability, and determine if they owe additional tax or are entitled to a refund.

For example, if an individual earns $50,000 in a year and the applicable tax rate is 20% for that income level, the individual would owe $10,000 in income tax. Various deductions, credits, and exemptions may apply to reduce the overall tax liability.

Related Articles:
  • Glossary: Capital Gains
    Capital Gains are the delightful profits you earn when you sell an asset for more than you paid. It’s like finding money in your pocket—only better!
  • Glossary: Marginal Tax Rate
    Marginal Tax Rate is like a party invitation for your income! It’s the percentage you pay on your last dollar earned. More income? More fun—at the tax dance!
  • Glossary: Pre-Tax Income
    Pre-Tax Income is your business's earnings before Uncle Sam takes a slice! It's the pot of gold before taxes, showing how well you're doing. Celebrate those profits!
  • Glossary: Tax Bracket
    Tax Bracket: Think of it as a tiered cake of income! The more you earn, the higher you slice. Each layer has its own sweet tax rate—making taxes a little sweeter!
  • Glossary: Tax Code
    Tax Code: The colorful rulebook of taxes! It's like a treasure map guiding you through deductions and credits, helping you navigate to financial treasures and avoid pitfalls. Happy filing!
« Back to Glossary Index