Income tax is generally calculated by applying a specific tax rate—or a set of progressive tax rates—to an individual's or entity's taxable income. Taxable income is typically derived by taking the total income earned from all sources and subtracting eligible deductions, such as business expenses or specific personal allowances. In many jurisdictions, progressive tax systems apply higher rates to higher brackets of income, meaning the marginal rate increases as additional units of income are earned. Corporations are often subject to a flat tax rate on their net profits. Furthermore, tax liability can be modified through the application of various credits, which directly reduce the total tax amount owed, or through exemptions for specific types of income. The exact calculation depends on the tax laws of the jurisdiction, the taxpayer's residency status, and the nature of the income received.