Income Tax In The United States
In the United States, a tax is imposed on income by the federal, most states, and many local governments. The income tax is determined by applying a tax rate, which may increase as income increases, to taxable income as defined. Individuals and corporations are directly taxable, and estates and trusts may be taxable on undistributed income.
Partnerships are not taxed, but their partners are taxed on their shares of partnership income. Residents and citizens are taxed on worldwide income, while nonresidents are taxed only on income within the jurisdiction. Several types of credits reduce tax, and some types of credits may exceed tax before credits. An alternative tax applies at the federal and some state levels.
Taxable income is total income less allowable deductions. Income is broadly defined. Most business expenses are deductible. Individuals may also deduct a personal allowance (exemption) and certain personal expenses, including home mortgage interest, state taxes, contributions to charity, and some other items. Some deductions are subject to limits.
Capital gains are taxable, and capital losses reduce taxable income only to the extent of gains (plus, in certain cases, $3,000 or $1,500 of ordinary income). Individuals currently pay a lower rate of tax on capital gains and certain corporate dividends.
Taxpayers generally must self assess income tax by filing tax returns. Advance payments of tax are required in the form of withholding tax or estimated tax payments. Taxes are determined separately by each jurisdiction imposing tax. Due dates and other administrative procedures vary by jurisdiction. April 15 following the tax year is the due date for individual returns for federal and many state and local returns. Tax as determined by the taxpayer may be adjusted by the taxing jurisdiction.
Read more about Income Tax In The United States: Basics, Federal Income Tax Rates, Taxable Income, Capital Gains, Partnerships and LLCs, Corporate Tax, Estates and Trusts, Retirement Savings and Fringe Benefit Plans, Credits, Alternative Minimum Tax, Accounting Periods and Methods, Tax Exempt Entities, Special Taxes, Special Industries, International Aspects, Social Security Tax, Withholding of Tax, Tax Returns, Tax Examinations, Penalties, Sources of U.S. Income Tax Laws, The Complexity of The U.S. Income Tax Laws, State, Local and Territorial Income Taxes
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