Income Taxes General information Individual income taxes Corporate income taxes

Income Taxes Federal Income Tax System—established in 1913 Tax rates are progressive U.S. Tax Code is divided into two major sections: Individuals Corporations

Individual Income Taxes Taxable income Gross income (salary, dividends, etc.) Less: Personal exemptions ($3,500 per dependent) Less: Deductions (standard = $5,450/$9,000)

Individual Income Taxes Capital gains Taxable income Tax liability = taxes paid to IRS Average tax rate Average tax rate Marginal tax rate = tax bracket percent

Corporate Income Taxes Interest and dividends Paid/received Dividend received = $100; tax rate = 40% Taxable amount of dividend = [$100(0.3)] = $30 Tax = $30(0.40) = $12 % tax = $12/$100 = 0.12 = 12% = 40%(0.30)

Corporate Income Taxes Capital gains Carryback and carryover—two years back/forward 20 years Accumulated earnings tax—$250,000 Consolidated corporate tax returns S Corporations—fewer than 100 stockholders Depreciation