Federal income taxes are a percentage of all taxable income (wages, interest earned, capital gains, etc.) that must be paid to the federal government by businesses and individuals. If you work for an employer, a percentage of each paycheck is withheld to account for this throughout the year. At tax time, you’ll determine whether you owe more or have over-paid and get a refund. This calculator will help you determine how much is being withheld as a percentage and monthly dollar amount.
What are taxes used for?
Federal income taxes are collected by the Internal Revenue Service (IRS) and then used according to the budget set by Congress and the president. The four largest areas that utilize tax dollars are:
- Major health programs
- Social security
- Aid and safety net programs
- Defense and security
How do I know if I have to file taxes?
Generally speaking, you’re not required to file if you’ve made less than the standard tax deduction (the deduction everyone gets to take). The standard deduction changes every year and depends on your status. In 2022, the standard for single and married filing separately filers is $12,550, for joint filers it’s $25,100, and for heads of household it’s $18,800. If you want to learn more about tax filing basics, go through the Your Tax Return Pre-Game Coach.
How do tax brackets work?
The US uses a progressive tax system. This means that the government breaks income into segments and only the money that falls into each segment is taxed at the corresponding rate.
Let’s look at an example using the 2022 brackets. If a single filer made $50,000, $10,275 would fall into the first bracket and be taxed at 10%, $31,500 (the amount of money in the second bracket of $10,275 to $41,775) would be taxed at 12%, and $8,225 (the amount of money left over in the final bracket) would be taxed at 22%. To learn more about how tax brackets work, check out this article on tax brackets and statuses.
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