Income Tax for Individuals
It’s safe to say that the majority of Americans have, at least once or twice, looked at their paychecks and exclaimed something along the lines of, “Where did all my money go?” Part of the deductions taken from everyone’s paychecks, along with income earned through investments, goes towards both state and federal income taxes! Even if income taxes aren’t taken from your paychecks, you owe the government come tax season.
HOW MUCH DO I PAY IN INCOME TAXES?
Considered a “progressive tax,” the amount each person is federally taxed depends on his/her income. Income tax laws allow each individual to earn a certain amount of non-taxable income, which is determined by tax forms’ standard deduction amount, and is usually around $5,000 per year. If a person earns less than the standard deduction amount throughout the year, he/she is eligible for income tax exemption, and will receive a return of all paid income taxes in his/her tax return.
Unless an individual claims an exempt status on his/her W-4s, the tax forms usually required prior to employment, income taxes are deducted from his/her paychecks. The percentage of taxable income is determined by dependency and marital status, along with projected income. In general, the more income a person earns, the higher the percentage he/she will be taxed. There are specific tax brackets to determine this percentage. For example, in 2010, the lowest tax bracket includes single people who earn up to $8,375 for the year, and they are federally taxed at 10%. The highest bracket includes single people who earn a minimum of $373,651 per year, and they are federally taxed at 35%.
As for state income taxes, each state has different requirements in terms of how much workers must pay in state taxes. In fact, seven states require that workers pay no income taxes at all! The majority of states work like the federal system, imposing a progressive tax dependent upon each person’s earnings and family situation.