This tax season, if you’re looking for a rough estimate of what you’ll pay, then you can be your own federal income tax calculator. With just a couple formulas, you can find out how much your federal income tax return will be. This article won’t make you the IRS tax calculator genius, but it will help you be more informed about your federal taxable income.
Federal Income Tax Calculator
What is the Federal Income Tax?
If you’ve ever been employed, you know the bittersweet feeling of getting your paycheck. You finally have your compensation for a hard month’s worth of labor, but it’s missing a chunk. The Internal Revenue Service, or IRS, imposes a tax on the yearly earnings of individuals, corporations, trusts, and other legal entities. This tax applies on all assets and earnings someone can receive, including cash gifts from your employer, the income you get from your own business, the money you get from gambling, unemployment compensation and work bonuses. The money collected from this tax is used on all sorts of government programs that help the country develop.
Explaining Tax Brackets
— Ann Thomas (@Sick_of_Bias) October 17, 2017
Federal tax income follows the progressive tax system, wherein those who earn more are taxed at a higher rate than those who earn less. People who earn less than the normal amount of money per year will pay little or no tax at all. Those who earn six figures or more have a mandatory tax rate that depends on their income.
As of 2017, unmarried people will pay the IRS the following percentage based on their income:
Note: Here are the federal income tax bracket tables for your reference.
Calculating Your Taxes
Now that you have an idea of where you may fall in the tax bracket system, you can become your own federal income tax calculator. Here’s an example of how you can estimate how much you need to pay your federal income tax.
- Your marital status is very important in computing for how much you need to pay. Lookup the specific tax bracket table that fits you. For this example, we’ll be using an unmarried taxpayer.
- Get the value of the total amount of cash you make in a year. Let’s just say that you made $50,000 this year.
- The first bracket is 10%. The first $9,325 you make will be taxed at 10%. So multiply that amount of money by 10%. You should get $932.50 for the answer.
- The next bracket is 15%. Subtract $9,326 from $37,950.The answer is $28,634. Multiply that number by 15%, and you should get $4,293.60.
- Next up, you need to compute for 25%. Since you hypothetically make $50,000 a year, you don’t have to use the value of $91,900. Subtract $37,951 from your earnings of $50,000 to get $12,049. Then, multiply that amount to 25%. The result is $3012.25.
- Add up all the values you got from multiplying with the percentages. Your total is $8,238.35. That is your federal income tax.
For an easy to understand video explanation on how to compute your federal income tax, give this video by Edspira a watch:
Understanding your federal income tax is difficult, but as long as you have the proper tax bracket tables, you should be able to get a rough estimate of what you need to pay. With a little math and some patience, you can be doing and filing your taxes in a better way.
How do you compute your federal income tax? Do you use an online calculator or hire a tax expert? Share your thoughts with us in the comments section below!