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Questions and Answers
What is income tax?
Income tax is a tax imposed on individuals or entities in respect of the income or profits earned by them.
How is income tax generally computed?
Income tax generally is computed as the product of a tax rate times the taxable income.
What is corporate tax?
Corporate tax is the tax imposed on companies and is commonly levied at a flat rate.
What are progressive tax rates?
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How is individual income often taxed?
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Study Notes
Income Tax
- Income tax is a type of tax levied on the income or profits earned by an individual or business.
- It is a direct tax, meaning the burden falls directly on the individual or organization.
Computation of Income Tax
- Income tax is generally computed by subtracting allowable deductions from the total income earned.
- The resulting taxable income is then multiplied by the applicable tax rate to arrive at the tax liability.
Corporate Tax
- Corporate tax is a type of income tax levied on the profits of a corporation.
- It is a tax on the company's profits, rather than the individual shareholders' profits.
Progressive Tax Rates
- Progressive tax rates are a system of taxation where higher income earners are taxed at a higher rate.
- The tax rate increases as the taxpayer's income crosses certain thresholds.
Individual Income Tax
- Individual income is often taxed on a sliding scale, with higher income earners paying a higher tax rate.
- Tax deductions and exemptions are available to reduce the taxable income, resulting in a lower tax liability.
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Description
Test your knowledge of income tax with this quiz! Explore different tax rates, types of income, and how taxation varies based on taxpayer characteristics. See how tax rates may change as taxable income increases.
