The federal personal income tax is the largest source of revenue for the U.S. government and funds everything from defense to schools to infrastructure projects. Almost every American is required to file federal income taxes and most have taxes withheld from each paycheck.
The amount each individual pays varies depending on income, credits, and other factors. Using an online calculator is a simple way to ballpark how much you should expect to pay. It’s also a good way to get an idea of whether you should be saving for Tax Day or anticipating a refund.
But when you need experts in tax services in Des Moines, IA, an online calculator alone won’t get the job done. Let’s take a look at how income tax rates are determined in the U.S.
The U.S. has what is referred to as a progressive income tax system, meaning there are different rates depending on income. These are marginal tax rates, which results in each portion of income having a different tax rate.
For example, according to 2018 rates, a couple making $50,000 would pay a 10-12 percent rate on the first $38,700 of their income, but a 22 percent rate on the final $11,300 of income. Brackets vary based on whether you’re married, single, or considered head of household.
As you probably know, calculating your tax load isn’t quite as simple as plugging in percentages. Federal tax rates aren’t applicable to gross income—meaning the total amount of all your income. The income that’s taxable is always going to be lower than gross income as taxpayers can deduct—or write off—parts of gross income.
For example, under the new tax law, a standard deduction for single filers is $12,000 and for married couples it’s $24,000. If you own a property, you can also write off $10,000 in property taxes. Other popular deductions include those for health insurance and charitable contributions.
Federal Tax Credits
These apply directly to the amount that you owe rather than your taxable income. Some common tax credits include the child and dependent care tax credit for childcare expenses and the earned income tax credit, which is available for those at a certain income level. An expert tax advisor can tell you about which credits you may qualify for.
Get Professional Tax Help
Are you looking for professional tax services in Des Moines, IA? You’ve come to the right place! Accounting & Tax Professionals, PLC has served Grimes, IA and the surrounding areas for more than two decades. We offer fast and reliable services assisting individuals, families and small businesses with the process of preparing and filing tax returns and dealing with a variety of complex tax problems.
Not only do we provide tax services, we also provide expert guidance in everything from retirement and college planning to business-related accounting issues. We’re a locally-owned and -operated business, and we take pride in serving all our customers. Give us a call right now to learn more about how our services can help you better understand your tax position.