The definition of federal income tax is the fact that individuals and organizations are obligated to pay some of their income to the federal government. It is the prime source of revenue of the government. This tax is computed on the basis of the calculation of the taxable income less deductions and credits and is used to support the national priorities such as defense, healthcare, education and government services. It also affects the behavior of the economy using tax incentives and penalties. The interpretation of the meaning of federal income tax would assist the taxpayers to be aware of how their contribution is benefiting the national programs and how they can spend their finances wisely under the tax system