Income tax in the United States Income tax in the United States Income taxes in the United States are imposed by the federal, most state, and many local governments. The income taxes are determined by applying a tax rate, which may increase as income increases, to taxable income, which is the total income less allowable deductions. Income is broadly defined. Individuals and corporations are directly taxable, and estates and trusts may be taxable on undistributed income. Partnerships are not taxed, but their partners are taxed on their shares of partnership income. Residents and citizens are taxed on worldwide income, while nonresidents are taxed only on income
Working Tax Credit significant levels of overpayments. In order to reduce the overpayment problem, the income disregard was raised tenfold from £2,500 to £25,000 with effect from 2006/07. Income for tax credit purposes is "in principle" assessed similarly to UK income tax. Thus 'income' (c/f 'taxable income') consists of what the individual receives from gross earned and unearned sources—less allowances for 'expenditures' that would reduce that income. But, unlike income tax, tax credits measure income based on family 'household', rather than the individuals within. Also the effect of "income disregard" —to mask large annual increases in resources from reassessment— weakens comparisons with a