Income tax is a charge on one's income that is paid to the government. Most countries around the world today are governed by democratically elected governments. These governments need revenue to finance the costs that they incur to run their countries. A large part of this revenue comes from collecting income tax.

Income tax is normally charged as a percentage of the income earned. The percentage of the tax may vary depending upon the different types of incomes. In some cases, there may be no tax at all. The tax rate may be progressive or flat. With a progressive tax rate, taxes are payable differentially based on how much income has been earned by a person. On the other hand, a flat tax rate treats all incomes the same. An income tax system may allow losses from one type of income to be deducted against profits or gains from another. For example, a loss on the stock market may be deducted against income earned from a business or profession.

Income tax was first introduced in Britain by William Pitt, in his budget presented in 1798. The tax was levied to pay for weapons and equipment, which were being prepared for the Napoleonic war. In the United States, income tax was levied for the first time during the Civil War.

In the U.S., federal income tax is levied on individuals as well as corporations. Tax may be levied by individual states as well, and in some cases, states allow individual cities to impose an additional income tax. However, all states do not levy the same type of income tax. In the states of Alaska and Florida, there is no tax on individuals but there is a state corporate income tax; and in Nevada and New Hampshire, there is no tax on interest and dividends.