what is a tax base 
a tax base is the total value of all of the assets income and economic activity that can be taxed by a taxing authority usually a government it is used to calculate tax liabilities tax liabilities are the portion of the tax base that is collected and they come in many forms including income property capital gains and sales taxes understanding the tax basea tax base is the total value of all assets properties individual income and corporate income in a certain area or jurisdiction to calculate the total tax liability you must multiply the tax base by the 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 income as a tax baselet s take personal or corporate income as an example in this case the tax base is the minimum amount of yearly income that can be taxed this is taxable income the internal revenue service irs assesses income tax on both personal income and the net income generated by businesses for example using the formula above we can calculate a person s tax liability say margaret earned 10 000 last year and the minimum amount of income that was subject to tax was 5 000 at a tax rate of 10 her total tax liability would be 500 calculated using her tax base 5 000 multiplied by her tax rate 10 to figure tax liabilities for personal income you use irs form 1040 the federal income tax return for individuals 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 and the personal tax rates are based on the total taxable income 3an individual taxpayer s tax base can change as a result of the alternative minimum tax amt calculation under amt the taxpayer is required to make adjustments to the initial tax calculation so additional items are added to the return the tax base and the related tax liability both increase 4as an example interest on some tax exempt municipal bonds is added to the amt calculation as taxable bond income if amt generates a higher tax liability than the initial calculation the taxpayer pays the higher amount factoring in capital gainstaxpayers are taxed on realized gains when assets such as real property or stock investments are sold say an investor owns an asset and it rises in value if they sell the asset for a gain it is a realized capital gain and they will owe taxes if the investor 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 any capital losses reduce the tax base of the gain after deducting losses the tax base of the capital gain is multiplied by capital gain tax rates 5examples of tax jurisdictionsin addition to paying federal taxes taxpayers are assessed taxes at the state and local levels in several 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 all but five states also assess sales tax which is imposed on most purchases 6 the tax base for sales tax in this case is the retail price of goods purchased by the consumer 