Income Tax

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Income tax is tax that you pay on your income, calculated as a percentage of your taxable income. How much you pay will depend on your tax bracket. Everyone who earns above a certain amount of money a year pays federal income tax to the federal government, and in most states people also have to pay state income tax to their state. See also Adjusted Gross Income, Exemptions, Marginal Tax Rate, Tax Credit, and Tax Deduction.