How to calculate income tax?

yousef7 July 2022Last Update : 2 years ago
How to calculate income tax?

The income tax to be paid is calculated based on rates that fall within tax brackets, where the remaining income is calculated after all deductions and deductions, so that it is then known to which bracket it belongs, for example if the residual income after deductions is $60,000 annually, the bracket that includes this is considered The amount, and let’s say it falls into the category ($37,951 – $91,900) and has a tax rate of 25%, so a person pays tax of 25% of income.

What is income tax

Income tax is one of the types of taxes that the state imposes on people, companies and institutions, as it is the main source of income for the government, to pay its obligations, finance services, and provide goods that citizens need. The income tax system is usually gradual, meaning that the value of the income tax increases. The tax is directly proportional to the amount of income earned by the institution and individuals. The tax includes income from wages, investments and profits, salaries, in addition to commissions.

Income tax paid by individuals differs from that paid by companies and institutions, as the individual’s income is subject to a number of exceptions and exemptions such as health insurance, education costs, credit packages and other deductions that are deducted from the total income, which reduces the tax he pays, while companies pay Tax for any workers, contractors and other companies you work for.

Income exempt from income tax

There are some sources of income that are excluded and not counted with the rest of the income when calculating the tax that is imposed on income, and some of these sources are:

Health insurance, accident insurance. Gifts and donations, such as charitable donations, and tuition costs. Life insurance amount. inheritance. People in need, especially below the poverty line.

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