What are income taxes and how do they work?

What are income taxes and how do they work?

Income taxes are taxes imposed on individuals or entities based on their income. They are typically calculated as a percentage of earnings.

How is the income tax rate determined?

The income tax rate is determined by various factors, including your income level, filing status, and the tax laws in your country or state.

What deductions can I claim to reduce my taxable income?

Common deductions include mortgage interest, student loan interest, medical expenses, and contributions to retirement accounts.

What happens if I don't pay my income taxes?

If you don't pay your income taxes, you may face penalties, interest on the unpaid amount, and potential legal action from tax authorities.

Can you explain the difference between federal and state income taxes?

Federal income taxes are collected by the national government, while state income taxes are collected by individual states. Rates and rules vary.