income tax


Definition of income tax 

: a tax on the net income of an individual or a business

Examples of income tax in a Sentence

Federal income tax will be deducted from your pay. The new law will lower income taxes for most taxpayers.

Recent Examples on the Web

The lofts are expected to generate $13 million in low-income tax credits and another $1.2 million in historic tax credits. Sandra Guy, Chicago Reader, "News / Architecture / Neighborhoods Pullman to get first new residential building in nearly 50 years," 10 July 2018 When net corporate income tax revenue is considered, after hundreds of millions of dollars paid out annually in legacy corporate tax credits is accounted for, the plunge in corporate tax revenue is even more dramatic. Paul Egan, Detroit Free Press, "Snyder budgets shifted tax burden from corporations to individuals," 22 June 2018 Under the current budget year, which ends at the end of this month, communities saw their share of state income tax revenue cut by 10 percent, while the new spending plan halves the cut to 5 percent. Mike Nolan, Daily Southtown, "New taxes, job cuts possible as Orland Park officials tackle budget gap," 8 June 2018 Since then, the state has seen a $372 million bump in income tax revenue due to changes at the federal tax level. Julia O'donoghue,, "University Medical Center won't send layoff warnings -- yet," 10 May 2018 Property tax collections are up nearly 10 percent and income tax revenues 15 percent over the past four years. Fox News, "Detroit released from active state oversight of finances," 30 Apr. 2018 Moody's lists other Richmond Heights credit strengths as its proximity to Cleveland and its metro employment opportunities, strong liquidity and structural improvements in income tax revenues, as well as improved risk management practices. Jeff Piorkowski/special To,, "Moody's upgrades Richmond Heights' credit rating due to increased financial stability," 27 Apr. 2018 Critics of the program say giving Alabamians income tax credits means less money for the Education Trust Fund. Trisha Powell Crain,, "$30 million in AAA tax credits already claimed for 2018," 27 Apr. 2018 Indeed, state income tax revenues in December came in a whopping $4 billion or 32 percent above forecast. Kathleen Pender, San Francisco Chronicle, "California tax revenues soar ahead of projections as economy booms," 23 Apr. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'income tax.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of income tax

1799, in the meaning defined above

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Statistics for income tax

Last Updated

14 Oct 2018

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Time Traveler for income tax

The first known use of income tax was in 1799

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More Definitions for income tax

income tax


Financial Definition of income tax

What It Is

Income tax refers to annual taxes levied by the federal government and most state governments on individual and business income.  By law, businesses and individuals must file federal and state income tax returns every year to determine whether they owe taxes. Governments use the taxes they collect to fund their activities.

How It Works

Income tax is applied to both earned income (wages, salaries and commission) and unearned income (dividends, interest and rents).

The U.S. and many other countries employ a progressive income tax system in which higher income earners pay a higher tax rate compared to their lower earning counterparts. The intent of progressive systems is to distribute wealth more evenly across a population.

Here's an example of how a progressive tax is structured: Assume you are single and report $80,000 in taxable income for the 2010 tax year (filing in 2011). In accordance with the federal tax rates defined for single filers in 2010, the first $8,350 of your income is taxed at 10%; the next $8,351 through $33,950 of earnings are taxed at 15%; and the remaining $33,951 through $80,000 of your earnings are taxed at 25%.

[Click here to see our Progressive Tax Definition and Example.]

Why It Matters

Income taxes reduce the amount of earnings that individuals and businesses are allowed to keep. There are a couple of strategies investors can use to retain more of their income. The first is investing in tax-advantaged assets like U.S. government bonds and municipal bonds.

The second is to open a retirement account that is tax-advantaged. An IRA, 401(k), SEP IRA and Roth IRA are all examples of tax-advantaged accounts. Investors can hold any asset they like within these accounts. The tax benefits of a retirement account don’t depend on the investments you hold in the account.

[InvestingAnswers Feature: How to Avoid an IRS Audit]

Source: Investing Answers

income tax


English Language Learners Definition of income tax

: a tax paid on the money that a person or business receives as income

income tax


Kids Definition of income tax

: a tax on the income of a person or business

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income tax


Legal Definition of income tax 

: a tax on the net income of an individual or a business — compare excise, property tax

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Comments on income tax

What made you want to look up income tax? Please tell us where you read or heard it (including the quote, if possible).


evasion of direct action or statement

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