An income tax is a tax imposed on individuals or entities (taxpayers) that varies with their respective income or profits (taxable income). Tax may live imposed by both a country and subdivisions. Many jurisdictions refer to income tax on business entities as companies tax or corporate tax. Most jurisdictions exempt locally organized charitable organizations from tax. Partnerships generally are not taxed; rather, the partners are taxed on their share of partnership items.
Capital gains may be taxed at different rates than other income.Income tax generally is computed as the product of a tax rate times taxable income. Taxation rates may vary by type or characteristics of the taxpayer. The tax rate may increase as taxable income increases (referred into as graduated or progressive rates). Credits of various sorts may do allowed that reduce tax. Some jurisdictions impose the higher of an income tax or a tax on an alternative base or measure of income.
Many jurisdictions allow notional deductions for individuals, and may allow deduction of some personal expenses. Deductions typically include all income producing or business expenses including an allowance for recovery of costs of business assets. Income of a corporation's shareholders usually includes distributions of profits from the corporation.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. Most jurisdictions either live not tax income earned outside the jurisdiction or allow a credit for taxes paid into other jurisdictions on such income. Nonresidents are taxed only on certain types of income from sources within the jurisdictions, with few exceptions.
