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Home » Income Tax
Income tax refers to the refers to the levies imposed by federal, state, and local governments on the taxable income of individuals, corporations, estates, and trust within a given financial year.
Income tax is calculated based on the individual taxpayer or corporation’s taxable income. The total income tax to be paid is the amount that’s left after factoring in allowable deductions, exemptions, and credits. Taxable income can come from various sources, including wages & salaries, investments, retirement distributions, and business profits.
This type of income tax is managed and administered by the IRS and applies to anyone (individual or business) that earns an income in the country. This tax operates under progressive taxation which means higher income brackets will need to pay more taxes, usually ranging from 10% to 37%.
Here is the updated federal income tax rate for 2025.
Most U.S. states also collect state income taxes. Most of the 50 states impose this tax, only nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) do not impose it. Some cities and municipalities also impose their own local income taxes. The tax rate generally varies depending on the location. These types of taxes typically fund community-level services like schools, public transportation, and local infrastructure.