Income Tax & Gross vs Net Income

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What is gross income?

Back

Gross income is the total amount of money you earn before any deductions or taxes.

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What is net income?

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Net income is the amount of money you take home after all deductions, including taxes and other expenses.

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What is a fixed expense?

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A fixed expense is a cost that does not change from month to month, such as a car payment or rent.

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What is the benefit of filing taxes as married joint?

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Filing taxes as married joint can provide tax benefits, such as lower tax rates and higher deductions, potentially allowing couples to save more money.

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How many tax brackets exist in the U.S. tax system?

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As of 2023, there are seven federal income tax brackets in the U.S.

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What is the purpose of tax brackets?

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Tax brackets determine the rate at which income is taxed, with higher income levels being taxed at higher rates.

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What is the significance of the 16th Amendment?

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The 16th Amendment to the U.S. Constitution allows Congress to levy an income tax without apportioning it among the states.

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What factors influence the amount of federal income tax owed?

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Factors include filing status, taxable income, deductions, and credits.

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What is the difference between standard deduction and itemized deduction?

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A standard deduction is a fixed dollar amount that reduces taxable income, while itemized deductions are specific expenses that can be deducted from taxable income.

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What is a tax credit?

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A tax credit is an amount that taxpayers can subtract directly from the taxes they owe, reducing their overall tax liability.