Dual Rate Income Tax


DEFINITION of 'Dual Rate Income Tax'

An income tax rate structure in which two different tax rates are charged depending on income levels. All income will be taxed at the lower rate up to the cutoff income tax point and all income above the cutoff point is taxed at the higher rate. This is similar to a flat tax structure but instead of just one rate, it has two.

BREAKING DOWN 'Dual Rate Income Tax'

This tax structure is often considered to simplify the overall structure of the tax system by eliminating most tax deductions and loopholes. For example, an income tax system using a dual rate structure may charge 20% on all income up to $100,000 and charge 25% on every dollar of taxable income above $100,000. Therefore, if you had an income of $150,000, your tax owed would be $32,500 ($100,000 x 20% + $50,000 x 25%).

  1. Tax Code

    A federal government document, numbering tens of thousands of ...
  2. Flat Tax

    A system that applies the same tax rate to every taxpayer regardless ...
  3. Income Tax

    A tax that governments impose on financial income generated by ...
  4. Regressive Tax

    A tax that takes a larger percentage from low-income people than ...
  5. Proportional Tax

    A tax system that requires the same percentage of income from ...
  6. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
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  1. How does the marginal tax rate system work?

    The marginal tax rate is the rate of tax that income earners incur on each additional dollar of income. As the marginal tax ... Read Full Answer >>
  2. Do tax brackets include Social Security?

    A portion of your Social Security benefits may be subject to federal taxation using tax brackets. Your tax bracket is determined ... Read Full Answer >>
  3. Do 401k contributions reduce AGI and/or MAGI?

    Traditional 401(k) contributions effectively reduce both adjusted gross income (AGI) and modified adjusted gross income (MAGI). ... Read Full Answer >>
  4. Are IRS audits random?

    While the U.S. Internal Revenue Service (IRS) conducts some of its tax audits using random selection based on a statistical ... Read Full Answer >>
  5. Does the IRS report to credit bureaus?

    The Internal Revenue Service (IRS) doesn't report overdue tax debt to credit bureaus. Federal law protects the privacy of ... Read Full Answer >>
  6. Does the IRS charge interest on penalties?

    The Internal Revenue Service (IRS) charges interest on any overdue taxes owed, but it does not charge interest on penalties. ... Read Full Answer >>

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