GlossaryBeginner
Flat Tax
A tax system that applies a single, constant rate to all income or gains, regardless of amount -- the structural alternative to a progressive tax system.
A flat tax system applies a single, constant tax rate to all income or gains, regardless of the amount — the structural alternative to a progressive tax system (see Kaavon's "Progressive Tax" glossary definition), which applies increasing rates to higher brackets.
Some jurisdictions apply a flat rate specifically to capital gains (including crypto gains) even while using a progressive structure for ordinary income — check the relevant country-specific guide in Kaavon's crypto tax section for which structure actually applies to crypto gains in a given jurisdiction.
Examples
- A jurisdiction might use a progressive structure for ordinary employment income while applying a single flat rate specifically to capital gains, including crypto gains.
- Under a true flat tax, a taxpayer's effective tax rate and their stated tax rate are identical, unlike in a progressive system.