Federal Income Tax

AAA

DEFINITION of 'Federal Income Tax'

A tax levied by the United States Internal Revenue Service (IRS) on the annual earnings of individuals, corporations, trusts and other legal entities. Federal income taxes are applied on all forms of earnings that make up a taxpayer's taxable income, such as employment earnings or capital gains.

INVESTOPEDIA EXPLAINS 'Federal Income Tax'

It is important to distinguish between the general notion of income tax and federal income tax. In the United States, governments at the state level may also levy income taxes in addition to federal income taxes. Not all states have implemented state level income taxes. For example, the states of Texas and Florida are just two of the handful of states in which federal income taxes are the only income taxes that are levied.

VIDEO

RELATED TERMS
  1. Profits Interest

    A monetary right awarded to the general partner, investment manager ...
  2. Tax Planning

    Logical analysis of a financial situation or plan from a tax ...
  3. Federal Unemployment Tax Act - ...

    The original legislation that allows the federal government to ...
  4. Tax Schedule

    A rate sheet used by individual taxpayers to determine their ...
  5. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  6. Tax Table

    A table or chart displaying the amount of tax due based on income ...
Related Articles
  1. Insurance

    What are the key points when getting ready to file for unemployment aid?

    Before filing for unemployment aid, you must be unemployed, have worked in the past, lost the job through no your fault of your own and be seeking a new job.
  2. Taxes

    Cut Taxes By Reporting Property Damage

    Know the options you have for your insured property if and when a disaster strikes.
  3. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  4. Retirement

    Avoiding Too Much Tax On Your Distributions

    IRA assets can't be taxed twice - find out how to avoid paying the second time around.
  5. Options & Futures

    How To Owe Nothing On Your Federal Tax Return

    You have the control to determine whether you owe in April. Learn more here.
  6. Home & Auto

    The Bear On Bonds

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  7. Investing

    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 rate increases, the taxpayer ends up with less money per dollar earned ...
  8. Taxes

    How To Deduct All Of Your Charitable Donations?

    Donations made to charitable organizations can reduce your taxable income, thus your overall tax bill. But not all donations qualify to be deductable.
  9. Taxes

    What is Value-Added Tax (VAT) and who pays it?

    Learn about the definition of value-added tax, the necessary circumstances that require a business to pay it and when a business is exempt.
  10. Taxes

    What is the difference between gross income and earned income?

    Being able to distinguish between earned income and gross income is an important tool in preparing for and filing your individual tax returns each year.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center