Federal Income Tax

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The United States has an assortment of federal, state, local, and special purpose governmental jurisdictions. Each imposes taxes to fully or partly fund its operations. These taxes may be imposed on the same income, property or activity, often without offset of one tax against another. The types of tax imposed at each level of government vary, in part due to constitutional restrictions. Income taxes are imposed at the federal and most state levels. Taxes on property are typically imposed only at the local level, though there may be multiple local jurisdictions that tax the same property. Excise taxes are imposed by the federal and some state governments. Sales taxes are imposed by most states and many local governments. Customs duties or…show more content…
federal and most state income tax systems tax the worldwide income of residents.[2] A federal foreign tax credit is granted for foreign income taxes. Individuals may also claim the foreign earned income exclusion. Individuals may be a citizen or resident of the United States but not a resident of a state. Many states grant a similar credit for taxes paid to other states. These credits are generally limited to the amount of tax on income from foreign (or other state) sources. Filing status Main article: Filing Status (federal income tax) Federal and state income tax is calculated, and returns filed, for each taxpayer. Two married individuals may calculate tax and file returns jointly or separately. In addition, unmarried individuals supporting children or certain other relatives may file a return as a head of household. Parent-subsidiary groups of companies may elect to file a consolidated return. Graduated tax rates Income tax rates differ at the federal and state levels for corporations and individuals. Federal and many state income tax rates are higher (graduated) at higher levels of income. The income level at which various tax rates apply for individuals varies by filing status. The income level at which each rate starts generally is higher (i.e., tax is lower) for married couples filing a joint return or single individuals filing as head of…show more content…
Gross income includes "all income from whatever source," and is not limited to cash received. The amount of income recognized is generally the value received or which the taxpayer has a right to receive. Certain types of income are specifically excluded from gross income. The time at which gross income becomes taxable is determined under federal tax rules. This may differ in some cases from accounting rules.[7] Certain types of income are excluded from gross income (and therefore subject to tax exemption).[8] The exclusions differ at federal and state levels. For federal income tax, interest income on state and local bonds is exempt, while few states exempt any interest income except from municipalities within that state. In addition, certain types of receipts, such as gifts and inheritances, and certain types of benefits, such as employer provided health insurance, are excluded from income. Foreign persons are taxed only on income from U.S. sources or from a U.S. business. Tax on foreign persons on non-business income is at 30% of the gross income, but reduced under many tax
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