Income taxes are a fundamental part of a country’s tax system, wherein individuals, businesses, and other entities are required to pay a portion of their earnings to the government. These taxes are typically based on a percentage of one’s income, and the rates can vary depending on the taxpayer’s income level and other factors.
Income taxes are a major source of revenue for governments and are used to fund public services, infrastructure, healthcare, education, and various government programs. The tax code can be complex, with deductions, credits, and exemptions that can reduce the amount of income subject to taxation.
Filing income tax returns is an annual obligation for most individuals and businesses, and compliance with tax laws is essential to avoid penalties and legal consequences.
Income Tax Brackets
Income tax brackets in the USA are a system used to categorize taxpayers into different income levels, each associated with a specific tax rate. These brackets determine the percentage of income that individuals or households owe in federal income taxes to the government.
The United States employs a progressive tax system, meaning that as your income increases, you move into higher tax brackets and pay a higher tax rate on the portion of your income within that bracket.
As of the last update in 2021, there were seven federal income tax brackets in the USA, with tax rates ranging from 10% to 37%. However, it’s important to note that tax laws can change, and tax brackets may be adjusted by Congress, so it’s advisable to consult the most current IRS guidelines or a tax professional for the latest information.
Here’s a link to see the current year’s income tax brackets in the US.