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Income tax

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Income tax (in the United States) is the tax an individual must pay to the government on all income from all sources, less any exclusions. An exclusion is something that Congress has effectively said a taxpayer should not include in his or her income for tax purposes, such as employer-paid health insurance or interest from tax-exempt bonds or interest paid on a home mortgage. Exclusions, often referred to as deductions, are a matter of legislative grace; that is, taxpayers may not exclude, or deduct, from gross income any item which Congress has not specifically allowed.

Adjusted gross income

For individuals, Adjusted Gross Income (AGI) is gross income less any above-the-line deductions. Above-the-line deductions include such exclusions as trade or business deductions, alimony and moving expenses (and many others).

Taxable income is AGI less itemized deductions or the applicable standard deduction, whichever is greater, and a deduction for any allowable personal exemptions for the taxpayer, the taxpayer's spouse (if filing jointly), and the taxpayer's dependents.

See also

External links

This entry includes content from the following Wikipedia article: Income tax in the U.S.