Editing Taxation in the United States (section)

===Basic concepts===
[[File:Top Marginal State Income Tax Rate.svg|thumb|400px|Top Marginal State Income Tax Rate]]
The U.S. income tax system imposes a tax based on income on individuals, corporations, estates, and trusts.<ref>{{USC|26|1}} and {{USC|26|11}}; IRS [https://www.irs.gov/pub/irs-pdf/p17.pdf Publication 17] and [https://www.irs.gov/publications/p542/index.html Publication 542].</ref> The tax is taxable income, as defined, times a specified tax rate. This tax may be reduced by credits, some of which may be refunded if they exceed the tax calculated. Taxable income may differ from income for other purposes (such as for financial reporting). The definition of taxable income for federal purposes is used by many, but far from all states. Income and deductions are recognized under tax rules, and there are variations within the rules among the states. Book and tax income may differ. Income is divided into "capital gains", which are taxed at a lower rate and only when the taxpayer chooses to "realize" them, and "ordinary income", which is taxed at higher rates and on an annual basis. Because of this distinction, capital is taxed much more lightly than labor.

Under the U.S. system, individuals, corporations, estates, and trusts are subject to income tax. Partnerships are not taxed; rather, their partners are subject to income tax on their shares of income and deductions, and take their shares of credits. Some types of business entities may elect to be treated as corporations or as partnerships.<ref>[http://www.jct.gov/publications.html?func=startdown&id=4363 JCX-49-11, Joint Committee on Taxation], September 22, 2011, pp. 4, 50.</ref>

[[File:Federal Receipts by Source.svg|thumb|Federal receipts by source as share of total receipts (1950–2010): {{legend|#9f0f91|Individual Income Tax}}{{legend|#00ffff|Payroll Taxes}} {{legend|#157545|Corporate Income Taxes}} {{legend|#0000ff|Other Taxes}} {{legend|#ffa500|Excise Taxes}} {{legend|#f3f43f|Estate and Gift Taxes}}|left]]
Taxpayers are required to file tax returns and self assess tax. Tax may be withheld from payments of income (''e.g.'', withholding of tax from wages). To the extent taxes are not covered by withholdings, taxpayers must make estimated tax payments, generally quarterly. Tax returns are subject to review and adjustment by taxing authorities, though far fewer than all returns are reviewed.

Taxable income is [[gross income]] less exemptions, deductions, and personal exemptions. Gross income includes "all income from whatever source". Certain income, however, is subject to [[tax exemption]] at the federal or state levels. This income is reduced by [[tax deduction]]s including most business and some nonbusiness expenses. Individuals are also allowed a deduction for [[Personal exemption (United States)|personal exemptions]], a fixed dollar allowance. The allowance of some nonbusiness deductions is phased out at higher income levels.

The U.S. federal and most state income tax systems tax the worldwide income of citizens and residents.<ref>See, ''e.g.'', IRS Publication 17, p. 45.</ref> A federal [[foreign tax credit]] is granted for foreign income taxes. Individuals residing abroad may also claim the [[foreign earned income exclusion]]. Individuals may be a citizen or resident of the United States but not a resident of a state. Many states grant a similar credit for taxes paid to other states. These credits are generally limited to the amount of tax on income from foreign (or other state) sources.