Knowledge Base

Income Tax is an assessment levied upon individual or corporate incomes. The income tax is essentially a modern form of taxation.

In the United States, the income tax law of 1894 was declared unconstitutional on the grounds that it was a direct tax not apportioned according to state population. The adoption of the Sixteenth Amendment permitted both the corporate and individual income tax to become a lawful element in the federal tax structure. Since then they have been a major source of revenue for the federal government, yielding as much as 85% of all it receipts in some years. Income tax had been levied sporadically by various states since 1789; since 1919 most states have adopted the tax.

In general, personal incomes below a certain amount is exempted from the individual income tax’ the amount varying for single and for married persons with or without dependents. The tax is applied to the net income above such exemptions, and the rate becomes progressively higher for larger incomes. In many states and cities, lowered federal income taxes have been offset by higher state and local income and property taxes.