Income Tax
Abstract
This essay will explain the basic information of federal income tax. It helps to identify the different terms that are associated with income tax. It will point out how calculations are formed to paying taxes or getting a refund. This essay distinguishes the importance of your income and knowing what taxes you will be paying.
Federal income taxes can be complicated and hard to file. But, knowing how it works can help save money, understand how it’s calculated, and what is determined in taxation. Income tax includes your income, deductions, credits, capital gains and losses, and taxable income. All of these things are sum up to help reduce taxes.
There is a difference between federal and state income tax. In some states it is possible to pay both taxes when filing taxes. State income taxes are less complicated than federal income taxes. It is actually preferred to do federal income taxes first and go back and complete state taxes.
Federal income tax is about the amount of money you earn. People are put into tax brackets based on that amount. Federal taxation is known as progressive tax, since the more your taxable income increases the more the rate of tax will increase. For example, if you are single and make $8,000 one year and the next year you earn $13,000, the tax rate will go up because your income has increased.
Your tax rate also depends on your filing status. The different types of filing status are single, married, widow, or head of household. The tax brackets are different for each type of filing status.
A marginal tax rate and an effective tax rate are different rates which you are taxed. A marginal tax rate is what is paid on your additional dollar of income. For instance, if you receive a raise then that raise will be tax as well. An effective tax rate is the total taxes you pay divided by your taxable income.
Exemptions are claims that will reduce taxable income. It is a fixed amount that can change each year. The 2012 fixed
This essay will explain the basic information of federal income tax. It helps to identify the different terms that are associated with income tax. It will point out how calculations are formed to paying taxes or getting a refund. This essay distinguishes the importance of your income and knowing what taxes you will be paying.
Federal income taxes can be complicated and hard to file. But, knowing how it works can help save money, understand how it’s calculated, and what is determined in taxation. Income tax includes your income, deductions, credits, capital gains and losses, and taxable income. All of these things are sum up to help reduce taxes.
There is a difference between federal and state income tax. In some states it is possible to pay both taxes when filing taxes. State income taxes are less complicated than federal income taxes. It is actually preferred to do federal income taxes first and go back and complete state taxes.
Federal income tax is about the amount of money you earn. People are put into tax brackets based on that amount. Federal taxation is known as progressive tax, since the more your taxable income increases the more the rate of tax will increase. For example, if you are single and make $8,000 one year and the next year you earn $13,000, the tax rate will go up because your income has increased.
Your tax rate also depends on your filing status. The different types of filing status are single, married, widow, or head of household. The tax brackets are different for each type of filing status.
A marginal tax rate and an effective tax rate are different rates which you are taxed. A marginal tax rate is what is paid on your additional dollar of income. For instance, if you receive a raise then that raise will be tax as well. An effective tax rate is the total taxes you pay divided by your taxable income.
Exemptions are claims that will reduce taxable income. It is a fixed amount that can change each year. The 2012 fixed