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Questions and Answers
What is the term for the tax rate applied to the last dollar of income earned?
What is the term for the tax rate applied to the last dollar of income earned?
What is the fixed amount deducted from taxable income?
What is the fixed amount deducted from taxable income?
Which type of income tax system is characterized by a tax rate that increases as income increases?
Which type of income tax system is characterized by a tax rate that increases as income increases?
What is the term for the total income earned, including wages, salaries, and other income?
What is the term for the total income earned, including wages, salaries, and other income?
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What is the term for specific expenses deducted from taxable income, such as mortgage interest and charitable donations?
What is the term for specific expenses deducted from taxable income, such as mortgage interest and charitable donations?
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What is the term for direct reductions in tax liability, such as child tax credits?
What is the term for direct reductions in tax liability, such as child tax credits?
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Study Notes
Income Tax
Definition
- Income tax is a type of tax levied on an individual's or business's income or profits
- Also known as personal income tax
Types of Income Tax
- Progressive Tax: tax rate increases as income increases
- Proportional Tax: tax rate remains the same regardless of income level
- Regressive Tax: tax rate decreases as income increases
Income Tax Bases
- Gross Income: total income earned, including wages, salaries, and other income
- Taxable Income: gross income minus deductions and exemptions
Tax Rates
- Marginal Tax Rate: tax rate applied to the last dollar of income earned
- Effective Tax Rate: average tax rate paid on taxable income
Tax Filing
- Individuals: typically file tax returns on a calendar year basis
- Businesses: may file tax returns on a fiscal year basis
Income Tax Exemptions and Deductions
- Standard Deduction: fixed amount deducted from taxable income
- Itemized Deductions: specific expenses deducted from taxable income, such as mortgage interest and charitable donations
- Tax Credits: direct reductions in tax liability, such as child tax credits
Income Tax Around the World
- Developed Countries: high-income countries with complex tax systems, such as the US and UK
- Developing Countries: low-income countries with simpler tax systems, such as India and Brazil
Income Tax
Definition
- Income tax is a type of tax levied on an individual's or business's income or profits
- Also known as personal income tax
Types of Income Tax
- Progressive tax: tax rate increases as income increases
- Proportional tax: tax rate remains the same regardless of income level
- Regressive tax: tax rate decreases as income increases
Income Tax Bases
- Gross income: total income earned, including wages, salaries, and other income
- Taxable income: gross income minus deductions and exemptions
Tax Rates
- Marginal tax rate: tax rate applied to the last dollar of income earned
- Effective tax rate: average tax rate paid on taxable income
Tax Filing
- Individuals: typically file tax returns on a calendar year basis
- Businesses: may file tax returns on a fiscal year basis
Income Tax Exemptions and Deductions
- Standard deduction: fixed amount deducted from taxable income
- Itemized deductions: specific expenses deducted from taxable income, including mortgage interest and charitable donations
- Tax credits: direct reductions in tax liability, including child tax credits
Income Tax Around the World
- Developed countries: high-income countries with complex tax systems, including the US and UK
- Developing countries: low-income countries with simpler tax systems, including India and Brazil
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Description
Learn about the definition, types, and bases of income tax, including progressive, proportional, and regressive taxes.
