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

Loading the player...
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 FAQS
  1. How is a corporate bond taxed?

    A corporate bond is taxed through the interest earned on the bond, through capital gains or losses earned in the early sale ... Read Full Answer >>
  2. Are capital gains taxed differently in different countries?

    Capital gains are taxed quite differently in different countries. Some countries charge no capital gains tax. Most do include ... Read Full Answer >>
  3. What are the best ways to pay less income tax?

    Regardless of income, no one enjoys paying taxes. From part-time waiters to millionaire investors, everyone is looking to ... Read Full Answer >>
  4. What are the key points when getting ready to file for unemployment aid?

    Before filing for unemployment compensation, there are several key points that you must get right in order for your claim ... Read Full Answer >>
  5. 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 >>
  6. What is an IRS letter audit / audit by correspondence?

    Every year, the Internal Revenue Service (IRS) sends numerous notices to taxpayers. Letter audit, or audit by correspondence, ... Read Full Answer >>
Related Articles
  1. Taxes

    Cut Taxes By Reporting Property Damage

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

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  3. 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.
  4. 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.
  5. 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.
  6. Economics

    What is a Resident Alien?

    A resident alien is a foreigner who is a permanent resident of the country in which he or she resides but does not have citizenship.
  7. Retirement

    Roth 401(k) Vs. Roth IRA: Which One Is Better?

    It all depends on your age, your income - and your plans for your retirement nest egg.
  8. Taxes

    IRS Refund Lost? Here's What to Do

    Don't panic. There are a number of reasons your refund might be delayed – and solutions for each.
  9. Investing

    Three Reasons Inflation Isn’t What You Think

    Though U.S. inflation has been firming recently— the core consumer price index rose in April for a 3rd month in a row—prices likely aren’t rising as much.
  10. Economics

    What's a Deductible?

    With insurance, a deductible is the amount of money the insured pays out-of-pocket before the insurance company pays for the loss.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!