What is the tax amount?
The tax amount (or tax rate) is the amount that an individual or business has to be taxed. It depends on different countries and the type of work that the person or business is doing. Therefore, the tax amount is not universal and may differ among different individuals or corporates.
Paying taxes is considered a civic duty and a requirement of the law. It helps to facilitate common resources, such as the road, public library, or parks. Moreover, the tax also helps to support the less fortunate. How taxes are used depends on specific governments.
Factors that can influence an individual’s tax amount
The tax amount depends on several factors, which can ultimately lead to great differences between people. Here are the major factors:
- Taxable income: Your tax increases when your income increases. The marginal tax rate decides on how you are taxed by taxable income, at a specific rate depending on different income ranges.
- Filing status: Your tax also depends on your filing status, such as single, married, or head of household.
- Other adjustments: Some adjustments need to be subtracted from the taxable income, such as student loan interest, IRA contributions, or moving expenses.
- Possible exemptions: They are personal exemptions that you claim.
- Tax deductions: These include mortgage interest, charitable contributions, or medical expenses.
- Tax credits: They are only for specific circumstances, such as those with childcare expenses, government health insurance, etc., some of which are refundable.
Factors that influence a corporation’s tax amount
- The company’s profits: This is similar to income tax, but for corporations
- Environmental taxes: This is a type of economic tool to minimize environmental problems that a company may create, such as landfill tax. They are designed to encourage more sustainable activities made by companies.
- VAT (value-added tax): This tax is added to the value of goods or services that are traded between customers and the company. The tax amount depends on the cost of products rather than on taxpayers’ income.