BROWSE

Tax Base

What is a 'Tax Base'

Tax base is defined as the income or asset balance used to calculate a tax liability, and the tax liability formula is tax base multiplied by tax rate. The rate of tax imposed varies depending on the type of tax and the tax base total. Income tax, gift tax and estate tax are each calculated using a different tax rate schedule.

Explaining 'Tax Base'

The most common form of tax is income tax, which is assessed on both personal income and the net income generated by businesses; personal income tax is calculated using IRS Form 1040. The return starts with total income and then deductions and other expenses are subtracted to arrive at adjusted gross income (AGI). Itemized deductions and expenses reduce AGI to calculate the tax base, or taxable income, and the personal tax rates are based on the total taxable income.

Factoring in Capital Gains

Taxpayers are taxed on realized gains when assets, such as real property or investments, are sold. If an investor owns an asset and does not sell it, that investor has an unrealized capital gain and there is no taxable event. Assume, for example, an investor holds a stock for five years and sells the shares for a $20,000 gain. Since the stock was held for more than one year, the gain is considered long term and the tax base of the gain is reduced by any capital losses. After deducting losses, the tax base of the capital gain is multiplied by capital gain tax rates.

Examples of Tax Jurisdictions

In addition to paying federal taxes, taxpayers are assessed tax at the state, city and local level in several different forms. Most investors are assessed income tax at the state level, and homeowners pay property tax at the local level. The tax base for owning property is the home or building’s assessed valuation. States also assess sales tax, which is imposed on commercial transactions. The tax base for sales tax is the retail price of goods purchased by the consumer.


Further Reading


Globalisation and developing countries–a shrinking tax base?
www.tandfonline.com [PDF]
… taxes, unlike tariffs administered at centralised locations (seaports, airports, etc.) and implicit taxation by means … GDP and two-thirds of the drop in easy to collect taxes/GDP can … The association between tax revenue and the informal sector in developing countries warrants further …

The VAT Reform for Broadening the Tax Base and Adjustment of Intergovernmental Fiscal Relations in China <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-CMJJ201011014.htm' />The VAT Reform for Broadening the Tax Base and Adjustment of Intergovernmental Fiscal Relations in China [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-CMJJ201011014.htm'>PDF]
… taxes, unlike tariffs administered at centralised locations (seaports, airports, etc.) and implicit taxation by means … GDP and two-thirds of the drop in easy to collect taxes/GDP can … The association between tax revenue and the informal sector in developing countries warrants further …

Finding a new corporate tax base after the abolishment of the one-book system in EU member statesFinding a new corporate tax base after the abolishment of the one-book system in EU member states
www.tandfonline.com [PDF]
… taxes, unlike tariffs administered at centralised locations (seaports, airports, etc.) and implicit taxation by means … GDP and two-thirds of the drop in easy to collect taxes/GDP can … The association between tax revenue and the informal sector in developing countries warrants further …

What if IFRS were a tax base? New empirical evidence from an Austrian perspectiveWhat if IFRS were a tax base? New empirical evidence from an Austrian perspective
www.tandfonline.com [PDF]
… taxes, unlike tariffs administered at centralised locations (seaports, airports, etc.) and implicit taxation by means … GDP and two-thirds of the drop in easy to collect taxes/GDP can … The association between tax revenue and the informal sector in developing countries warrants further …

Corporate tax base erosion and profit shifting out of the Czech RepublicCorporate tax base erosion and profit shifting out of the Czech Republic
www.tandfonline.com [PDF]
… taxes, unlike tariffs administered at centralised locations (seaports, airports, etc.) and implicit taxation by means … GDP and two-thirds of the drop in easy to collect taxes/GDP can … The association between tax revenue and the informal sector in developing countries warrants further …

Distribution of development costs under tax increment financingDistribution of development costs under tax increment financing
www.tandfonline.com [PDF]
… taxes, unlike tariffs administered at centralised locations (seaports, airports, etc.) and implicit taxation by means … GDP and two-thirds of the drop in easy to collect taxes/GDP can … The association between tax revenue and the informal sector in developing countries warrants further …

Does federalism lead to excessively high taxes?Does federalism lead to excessively high taxes?
pubs.aeaweb.org [PDF]
… taxes, unlike tariffs administered at centralised locations (seaports, airports, etc.) and implicit taxation by means … GDP and two-thirds of the drop in easy to collect taxes/GDP can … The association between tax revenue and the informal sector in developing countries warrants further …

The effect of profit shifting on the corporate tax base in the United States and beyondThe effect of profit shifting on the corporate tax base in the United States and beyond
papers.ssrn.com [PDF]
… taxes, unlike tariffs administered at centralised locations (seaports, airports, etc.) and implicit taxation by means … GDP and two-thirds of the drop in easy to collect taxes/GDP can … The association between tax revenue and the informal sector in developing countries warrants further …

Mass Appraisal: A Tax Base Appraisal Method for Ad Valorem Tax <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-ZCPG200511002.htm' />Mass Appraisal: A Tax Base Appraisal Method for Ad Valorem Tax [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-ZCPG200511002.htm'>PDF]
… taxes, unlike tariffs administered at centralised locations (seaports, airports, etc.) and implicit taxation by means … GDP and two-thirds of the drop in easy to collect taxes/GDP can … The association between tax revenue and the informal sector in developing countries warrants further …

The European Commission's proposal for a common consolidated corporate tax baseThe European Commission's proposal for a common consolidated corporate tax base
academic.oup.com [PDF]
… taxes, unlike tariffs administered at centralised locations (seaports, airports, etc.) and implicit taxation by means … GDP and two-thirds of the drop in easy to collect taxes/GDP can … The association between tax revenue and the informal sector in developing countries warrants further …



Q&A About Tax Base


Are there any special rules regarding long-term capital losses ?

Yes, if an investor has a loss on sale of an investment , that loss can be used to offset any taxable gain from another investment within the same year .

What is a tax base?

A tax base is the value on which a

How is personal capital gain taxed ?

Capital gains realized from assets held for more than one year are considered long term capital gains . Long-term capital gains have lower rates than short-term capital gains .

Where do most investors pay state level income taxes?

Most investors pay state level income taxes in their home states.

Are taxes based on income or wealth?

Taxes are based on both income and wealth.

When do you pay state level income taxes?

You pay state level income taxes when you file your federal return.

In addition to paying federal, what other type of local taxation do taxpayers face?

Taxpayers are also assessed sales at the local level in several forms including sales tax on commercial transactions and property value assessment for homeownership purposes.

Is a tax compulsory or voluntary?

A tax is compulsory.

What does government use taxes for?

Taxes are used to fund public, common, and agreed national needs and government functions.

How are different types of taxes calculated using different rates?

Income taxes, gift taxes and estate taxes are all calculated using different rates.

What is the tax base?

The tax base is defined as the income or asset balance used to calculate a tax liability.

Are all countries required to pay taxes?

Yes, all countries are required to pay taxes.

What does the formula for calculating taxes look like?

Tax base multiplied by tax rate.