Individual Income Taxes Flashcards, test questions and answers

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What is Individual Income Taxes?

Individual income taxes are taxes paid by citizens of a country or state on the income they earn from employment, investments, and other sources. They are usually based on progressive tax rates that increase as the individual’s taxable income rises. In most countries, individuals must file their returns annually and pay the appropriate amount of tax based on their total taxable income.Individuals may be able to reduce their taxable income through deductions or credits such as those available for charitable donations, child care expenses, education costs, mortgage interest payments and other items. Additionally, certain types of incomes may be excluded from taxation altogether. For example, in some jurisdictions capital gains may not be taxed until the funds are withdrawn from an investment account. In addition to these deductions or exclusions from taxation there may also be specific exemptions applicable to certain individuals such as those related to age or health status. The purpose of individual income taxes is typically twofold: to collect revenue for government spending and services; and to redistribute wealth among different groups within society. The use of progressive tax rates helps ensure that people with higher incomes pay a greater share of their incomes in taxes than those with lower incomes thus helping ensure that wealthier individuals contribute more towards funding public goods like education and infrastructure development which benefit everyone regardless of wealth level. In many countries individual taxpayers have access to online filing tools which simplify filing returns and paying any owing amounts due in a timely fashion while still allowing them to take advantage of any deductions or exemptions they qualify for under applicable law.