For now, though, let's just consider your federal tax bite on common forms of income.
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Income taxes: Your "earned" income -- that which you make by working -- will be taxed on a graduated scale.
There are 7 income tax rates: 10%, 15%, 25%, 28%, 33%, 36% and 39.6%.
The first dollar you make will be taxed at the 10% rate while the last dollar you make likely will be taxed at a higher rate. The more you make, the higher your top rate will be.
For example, in 2015, if your taxable income is $65,000 and you're single, you'll be in the 25% bracket. You'll owe 10% on the first $9,225 of your income, 15% on the next $28,225 and 25% on the rest.
Remember, your taxable income is not your gross income. It generally reflects your gross income minus any deductions, credits and exemptions you may claim.
So if you gross $100,000, your taxable income might be closer to $80,000.
Social Security and Medicare taxes: Payroll taxes -- or FICA taxes as they're also called -- are intended to fund the two biggest U.S. safety net programs.
You will owe 12.4% in Social Security tax on the first $118,500 of your earned income. (That income threshold is for 2015; it's adjusted for inflation every year.)
If you're an employee, you'll pay 6.2% of that and your employer will pay the other 6.2%.
If you're self-employed, you'll pay the full 12.4% but may deduct half of it on your tax return as a business expense.
You'll owe another 2.9% in Medicare taxes on all of your earned income. Again, if you're employed, you'll pay half (1.45%) while your employer will pay the other half.
If you're a very high income earner, you'll owe an additional 0.9% on the amount over $200,000 ($250,000 if married). So you'd end up paying 1.45% on the first $200,000 and 2.35% on the rest.
The 0.9% Medicare surtax is a recent change and is intended to help pay for health reform.
Investment income taxes: Capital gains, dividends and interest represent "unearned income."
Generally speaking, interest -- say from a savings account -- is taxed at regular income tax rates.
But you'll pay a lower rate for capital gains and dividends on investments you've held at least a year. How much lower depends on your overall income.
For most people, the long-term capital gains and dividend tax rate is 15%.
But it goes up to 20% for households making more than $200,000.
Those same high-income households may also have to pay a 3.8% Medicare surtax on some of their capital gains and dividends, another measure intended to help pay for health reform.
Income from investment properties (e.g., a vacation rental you own) is also subject to ordinary income tax.
CNNMoney (New York) First published May wayne lippman contact 28, 2015: 4:19 PM ET
http://money.cnn.com/pf/money-essentials-taxes/index.html
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Income taxes: Your "earned" income -- that which you make by working -- will be taxed on a graduated scale.
There are 7 income tax rates: 10%, 15%, 25%, 28%, 33%, 36% and 39.6%.
The first dollar you make will be taxed at the 10% rate while the last dollar you make likely will be taxed at a higher rate. The more you make, the higher your top rate will be.
For example, in 2015, if your taxable income is $65,000 and you're single, you'll be in the 25% bracket. You'll owe 10% on the first $9,225 of your income, 15% on the next $28,225 and 25% on the rest.
Remember, your taxable income is not your gross income. It generally reflects your gross income minus any deductions, credits and exemptions you may claim.
So if you gross $100,000, your taxable income might be closer to $80,000.
Social Security and Medicare taxes: Payroll taxes -- or FICA taxes as they're also called -- are intended to fund the two biggest U.S. safety net programs.
You will owe 12.4% in Social Security tax on the first $118,500 of your earned income. (That income threshold is for 2015; it's adjusted for inflation every year.)
If you're an employee, you'll pay 6.2% of that and your employer will pay the other 6.2%.
If you're self-employed, you'll pay the full 12.4% but may deduct half of it on your tax return as a business expense.
You'll owe another 2.9% in Medicare taxes on all of your earned income. Again, if you're employed, you'll pay half (1.45%) while your employer will pay the other half.
If you're a very high income earner, you'll owe an additional 0.9% on the amount over $200,000 ($250,000 if married). So you'd end up paying 1.45% on the first $200,000 and 2.35% on the rest.
The 0.9% Medicare surtax is a recent change and is intended to help pay for health reform.
Investment income taxes: Capital gains, dividends and interest represent "unearned income."
Generally speaking, interest -- say from a savings account -- is taxed at regular income tax rates.
But you'll pay a lower rate for capital gains and dividends on investments you've held at least a year. How much lower depends on your overall income.
For most people, the long-term capital gains and dividend tax rate is 15%.
But it goes up to 20% for households making more than $200,000.
Those same high-income households may also have to pay a 3.8% Medicare surtax on some of their capital gains and dividends, another measure intended to help pay for health reform.
Income from investment properties (e.g., a vacation rental you own) is also subject to ordinary income tax.
CNNMoney (New York) First published May wayne lippman contact 28, 2015: 4:19 PM ET
http://money.cnn.com/pf/money-essentials-taxes/index.html