Local Income Tax Law and Legal Definition

A local income tax rate is relative to where you live. The local income tax is calculated as a percentage of taxable income. In some states, the rate ise flat - a single tax rate for all income levels. Many other states have progressively higher rates as taxpayers' income levels rise. In some areas, only individuals and not corporations pay local income taxes. The method of computing, collecting, and spending the tax varies by jurisdiction.

Depending on state law, certain exemptions may apply, such as for income from investments and retirement income. Local tax withheld as well as estimated tax payments can be deducted from your Federal Income Tax on Schedule A of Form 1040. Local laws should be consulted for specific requirements in your area.