A Helpful Guide to Income Tax
Personal income taxes are taxes paid by individuals that reach the minimum threshold of income. Income taxes that are imposed on certain businesses and other entities, are called corporate income taxes. Income from any source, is often considered as a contributing factor in determining an individuals or corporation's income tax responsibility.
Their are personal income taxes, which are the singular responsibility of each tax payer. There are alsocorporate income taxes which each business is responsible for. Income taxes are a federal tax but a majority of the states also have a separate income tax. There are however, several states that do not impose income taxes. States that do impose income taxes, and all federal income taxes, have allowable deductions allotted that can lower income taxes.
Income taxes are determined by adding total income, from any source. Sources of income are limitless and can include salary, garage sales, short term capital gains, property sales, and the sale of antiques. The list of possible types of income is exhaustive. In general, any money that a person receives, whether for work, the sale of an item or continued income from royalties, falls under the income tax.
The manner of ways that individuals can make income, is limitless. Once all of the income has been totaled, there are allowable deductions. Individuals can deduct things such as dependents, medical expenses and travel expenses for work. Businesses calculate income differently than individual taxpayers. Before a business takes allowable deductions from their income, they subtract all business related expenses from their income. In fact, a businesses income tax is actually a tax placed on their profit.
Income taxes were legalized when the Sixteenth Amendment was ratified. That Amendment grants the government the right to collect a direct tax on the income of each citizen, or entity, such as a business. However, there are some individuals and organizations that are tax exempt, such as members of the clergy and churches.
The Amendment has been declared constitutional, despite being challenged in court on dozens of occasions. The constitutionality of income taxes has been challenged based on several different factors, but the Amendment has been upheld in every case. In each case, the courts have decided that income taxes are constitutional as long as they follow specific rules, such as those Uniformity and Equal Protection Clause. Taxes cannot be levied by either the federal or state government unless they are fair and free of discrimination and prejudice. Income taxes collected by any jurisdiction, must also be used for a public purpose, such as education.
