Income Tax Expense
Income Tax Expense is the total sum paid to the government as a tax on earnings
The Income Tax is found on a company's Income Statement and is subtracted from the company's Pre-Tax Income to obtain their Net Income. Investors often pay special attention to a company's income before applying the income tax expense as companies have a number of techniques available to them to minimize or avoid paying income taxes. As stated on the Income Statement, the income tax amount has not actually been paid - it is an estimate, or an account that has been created to cover what a company expects to pay.
Income taxes are imposed by the government on the annual gains of a person, corporation, or other taxable unit derived through work, business pursuits, investments, property dealings, and other sources as described by the federal, state, or municipal laws.
Company XYZ purchased $10 million worth of preferred stock that was paying a 10% yield. The company would receive $1 million a year in dividends on the preferred. However, if the company had an income tax expense rate of, say, 35%, $0.35 million will be collected by the government. As a result, only $0.65 million of the $1 million dividends will be what the company will receive.