What is "income tax"

Income \In"come\, n.

1. A coming in; entrance; admittance; ingress; infusion. [Obs.]
   --Shak.

   More abundant incomes of light and strength from God.
   --Bp. Rust.

   At mine income I louted low.
   --Drant.

2. That which is caused to enter; inspiration; influence; hence, courage or zeal imparted. [R.]

   I would then make in and steep My income in their blood.
   --Chapman.

3. That gain which proceeds from labor, business, property, or capital of any kind, as the produce of a farm, the rent of houses, the proceeds of professional business, the profits of commerce or of occupation, or the interest of money or stock in funds, etc.; revenue; receipts; salary; especially, the annual receipts of a private person, or a corporation, from property; as, a large income.

   No fields afford So large an income to the village lord.
   --Dryden.

4. (Physiol.) That which is taken into the body as food; the ingesta; -- sometimes restricted to the nutritive, or digestible, portion of the food. See Food. Opposed to output.

   Income bond, a bond issued on the income of the corporation or company issuing it, and the interest of which is to be paid from the earnings of the company before any dividends are made to stockholders; -- issued chiefly or exclusively by railroad companies.

   Income tax, a tax upon a person's incomes, emoluments, profits, etc., or upon the excess beyond a certain amount.

   Syn: Gain; profit; proceeds; salary; revenue; receipts; interest; emolument; produce.

n. A tax levy on earned and unearned income, net of allowed deductions.

n. a personal tax levied on annual income

An income tax is a tax imposed on individuals or entities (taxpayers) that varies with the income or profits (taxable income) of the taxpayer. Details vary widely by jurisdiction. Many jurisdictions refer to income tax on business entities as companies tax or corporate tax. Partnerships generally are not taxed; rather, the partners are taxed on their share of partnership items. Tax may be imposed by both a country and subdivisions. Most jurisdictions exempt locally organized charitable organizations from tax.

Income tax generally is computed as the product of a tax rate times taxable income. The tax rate may increase as taxable income increases (referred to as graduated rates). Taxation rates may vary by type or characteristics of the taxpayer. Capital gains may be taxed at different rates than other income. Credits of various sorts may be allowed that reduce tax. Some jurisdictions impose the higher of an income tax or a tax on an alternative base or measure of income.

Taxable income of taxpayers resident in the jurisdiction is generally total income less income producing expenses and other deductions. Generally, only net gain from sale of property, including goods held for sale, is included in income. Income of a corporation's shareholders usually includes distributions of profits from the corporation. Deductions typically include all income producing or business expenses including an allowance for recovery of costs of business assets. Many jurisdictions allow notional deductions for individuals, and may allow deduction of some personal expenses. Most jurisdictions either do not tax income earned outside the jurisdiction or allow a credit for taxes paid to other jurisdictions on such income. Nonresidents are taxed only on certain types of income from sources within the jurisdictions, with few exceptions.

Most jurisdictions require self-assessment of the tax and require payers of some types of income to withhold tax from those payments. Advance payments of tax by taxpayers may be required. Taxpayers not timely paying tax owed are generally subject to significant penalties, which may include jail for individuals or revocation of an entity's legal existence.