HI my Dear friends What are the types of income tax
Answers
Answer:
Wealth Tax. If you want to know about the different types of income tax, start with the wealth tax. ...
Corporate Tax. As per the IT Act of 1961, national as well as international corporate organisations are also required to pay corporate tax. ...
Capital Gains Tax.
Step-by-step explanation:
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Answer:
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Step-by-step explanation:
Types of Income Tax
Individual Income Tax
Individual income tax is also referred to as personal income tax. This type of income tax is levied on an individual's wages, salaries, and other types of income. This tax is usually a tax the state imposes. Because of exemptions, deductions, and credits, most individuals do not pay taxes on all of their income.11
The IRS offers a series of income tax deductions and tax credits that taxpayers can make use of to reduce their taxable income. While a deduction can lower your taxable income and the tax rate that is used to calculate your tax, a tax credit reduces your income tax by giving you a larger refund of your withholding.12
The IRS offers tax deductions for healthcare expenses, investments, and certain education expenses. For example, if a taxpayer earns $100,000 in income and qualifies for $20,000 in deductions, the taxable income reduces to $80,000 ($100,000 - $20,000 = $80,000).12
Tax credits exist to help reduce the taxpayer's tax obligation or amount owed. They were created primarily for those in middle-income and low-income households. To illustrate, if an individual owes $20,000 in taxes but qualifies for $4,500 in credits, their tax obligation reduces to $15,500 ($20,000 - $4,500 = $15,500).12
Business Income Taxes
Businesses also pay income taxes on their earnings; the IRS taxes income from corporations, partnerships, self-employed contractors, and small businesses.4 Depending on the business structure, either the corporation, its owners, or shareholders report their business income and then deduct their operating and capital expenses. Generally, the difference between their business income and their operating and capital expenses is considered their taxable business income.1314
State and Local Income Tax
Most U.S. states also levy personal income taxes. As of 2020, there are seven states with no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. In addition, two other states—New Hampshire and Tennessee—do not tax earned income; however, they do tax dividends and interest.15
However, Tennessee is set to eliminate those taxes on dividends and interest (an effort to repeal the tax in New Hampshire failed in 2018) and it is projected that the number of states in the U.S. with no income tax will reach eight in 2021.1617
For taxpayers, it may not necessarily be cheaper to live in a state that does not levy income taxes. This is because states often make up the lost revenue with other taxes or reduced services. In addition, there are other factors that determine the affordability of living in a state, including healthcare, cost of living, and job opportunities.