What 1861 law created the first U.S. federal income tax to help fund the Civil War?

The Revenue Act of 1861 created the first U.S. federal income tax. Congress passed the law on August 5, 1861, as the Union government urgently needed money to finance the Civil War. President Abraham Lincoln signed it into law.

The act imposed a flat 3 percent tax on annual incomes above $800, a threshold reached by only a small share of Americans at the time. It was part of a broader revenue package that also included tariffs and a direct property tax. The income-tax provision applied to income from property, professions, trades, employment, and other sources.

This wartime tax was short-lived. Because the law lacked an effective enforcement system, Congress repealed its income-tax provisions in 1862 and replaced them with a broader measure. The Revenue Act of 1862 introduced a graduated tax structure and created the Bureau of Internal Revenue, the institution that eventually became the Internal Revenue Service.

A common mix-up is confusing this law with the Revenue Act of 1862. The 1861 act came first, but the 1862 law developed the federal income-tax system more fully.