A yearly federal tax on a person's earnings is known as what?

• A. Payroll Tax
• B. Income Tax
• C. Sales Tax
• D. Property Tax

Answer: (B)

Income tax is the yearly tax on the money you earn from work and other sources. The amount you owe is based on your total income after deductions and credits, and different income levels are taxed at higher rates in what are called tax brackets. Payroll taxes, which fund Social Security and Medicare, are taken from your paycheck separately from income tax. Sales tax is charged when you buy goods or services, not based on how much you earn. Property tax is charged on the value of property you own and is usually set by local governments. So, the tax on earnings you file with every year is income tax.