Taxes are a part of life that many people would like to avoid. However, individual taxes in the United States affect all citizens and their individual situations. Certain individual taxes can be lowered by taking advantage of certain credits and deductions, while others cannot be changed at all.
This blog post will break down 10 things that affect your individual taxes in the United States. But first, let’s answer some common questions around taxes.
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First, What Things Affect Individual Taxes?
Taxes in the United States are cumbersome. When tax season rolls around in April, it is easy to get confused and frustrated trying to understand individual taxes. Taxes are confusing because individual taxes can be changed by certain factors that you have no control over, while other factors such as taking advantage of certain tax credits or deductions can drastically change your tax burden.
That is, of course, if you know what you’re doing.
On a basic level, your taxes are determined by the amount of wages you earn, the individual tax brackets you fall into based on your income, and how many deductions or credits that apply to your situation.
In this blog post, individual taxes will be discussed in terms of an individual’s gross income, which is their total wages earned throughout the year before any deductions are taken out.
The individual tax brackets that an individual falls into based on their gross income are as follows:
|Rate||Single Individuals||Married Individuals Filing Joint Returns||Head of Households|
|10%||Up to $9,950||Up to $19,900||Up to $14,200|
|12%||$9,951 to $40,525||$19,901 to $81,050||$14,201 to $54,200|
|22%||$40,526 to $86,375||$81,051 to $172,750||$54,201 to $86,350|
|24%||$86,376 to $164,925||$172,751 to $329,850||$86,351 to $164,900|
|32%||$164,926 to $209,425||$329,851 to $418,850||$164,901 to $209,400|
|35%||$209,426 to $523,600||$418,851 to $628,300||$209,401 to $523,600|
|37%||$523,601 or more||$628,301 or more||$523,601 or more|
While individual tax brackets and individual taxes may look complicated, the point is that your individual taxes are determined by how much money you make. The more money you make, the more individual taxes you will pay.
Second, What are Payroll Taxes & Federal Income Tax Withholding
When you are paid for your job, individual taxes are automatically withheld from your paycheck. This withholding takes place even if you do not owe individual taxes at the end of the year.
This individual withholding is called payroll taxes and individual taxes are automatically withheld from each paycheck an individual earns throughout the year. This individual withholding is how the government ensures that taxes are collected throughout the year, instead of all in one lump sum come April.
The individual withholding can be adjusted, however. Withholding too much or not enough money from an individual’s paycheck means that the individual may owe individual taxes or receive a refund at the end of the year.
In order to get individual withholding right, individuals can use their W-2 individual tax form. On individual W-2 individual tax forms, you can determine how much individual withholding will take place throughout the year by using their individual tax bracket and individual taxable income.
Third, What About Wage and Tip Income?
While individual taxes are automatically withheld from an individual’s paycheck throughout the year, individual taxes are still owed on an individual’s wage and tip income.
Individuals who work in the service industry may earn wages or tips throughout the year. If individual income is earned in this way, individual taxes will still be owed on that individual income, even if individual withholding has already taken place.
Individual wage and tip income is calculated based on how much individual wage or tips an individual receives throughout the year. Because tips are often paid for in cash, individual tips need to be reported on a 4137 form.
Now that we’ve covered some of the basics, let’s dive into 10 specific things that might affect your individual taxes.
1.) Taxable income
What type of income is considered taxable in the eyes of the IRS?
Your individual income is considered taxable if it falls under the six categories of wage and tip income, interest income, dividends (qualified or non-qualified), individual retirement arrangement (IRA) distributions, pensions and annuities, or social security benefits.
However, if you make money from your individual business, your individual income is considered taxable. This also applies to any other money made from capital gains or gambling winnings!
How much individual taxes will I have to pay?
Individual tax rates vary depending on your individual taxable income. For example, individuals who are single and have a taxable individual income of $37,450 and up will pay a rate of 25%. Or if your individual taxable income is greater than $200,000, individual taxes are increased substantially to 28%.
You can find out how much individual taxes you will have to pay by using the tax bracket breakdown above.
2.) Payroll Taxes & Federal Income Taxes
Hold up, why does my employer deduct taxes from my paycheck?
Your individual taxes are not the only taxes that affect your individual situation.
Payroll taxes and federal income tax withholding is another factor when it comes to individual taxes. Employers are required by law to withhold a certain percentage of your individual income towards federal income tax withholding, social security, and Medicare taxes.
For individual employees, these taxes are deducted from your income before you even receive it! Yes, that means the money is gone once your employer withholds it from your individual paycheck. However, there is a limit to how much individual taxes can be deducted for payroll tax withholding purposes per individual, so individual taxes withheld from your individual paycheck may not be the full individual tax amount.
3.) Filing Status
What are the different forms of filing statuses?
Another individual tax factor is your individual filing status. Your individual filing status usually depends on who you are married to and whether or not you have any dependents.
For individual taxpayers, there are four basic filing statuses: single, married individual filing jointly with their spouse, married individual filing separately from their spouse, and head of individual household.
Individual taxes are usually lowered if you file individual taxes jointly with your spouse rather than filing individual taxes separately. The individual tax credits are usually greater, individual deductions are larger, and individual income is taxed at a lower rate.
If you have dependents, individual taxes can be reduced even further by claiming individual dependents.
Divorced individual taxpayers have a different filing status known as married individual filing separately. This individual filing status entitles individuals to lower individual tax rates and higher individual deductions than single individuals, so it is usually beneficial for individual taxpayers to file individual taxes as married individuals filing separately rather than single.
Remember, individual tax laws are always changing so it is important that you are up to date with individual tax laws that affect individual taxes every year.
What are exemptions and how do they change my taxes?
Tax exemptions are individual tax benefits given to individual taxpayers. They reduce individual taxable income by a set amount, so individual taxes owed decrease as well!
Examples of exemptions are individual dependents and individual tax credits.
Individual taxpayers receive individual exemptions for themselves, their spouse (if applicable), and any individual dependents claimed on individual taxes.
5.) Standard deduction
What is the standard deduction?
The individual standard deduction is an individual tax benefit given to individual taxpayers.
Individuals can either take the individual standard deduction or itemized deductions (individual deductions).
To claim individual standard deduction, individual taxpayers must document their individual situation and reporting all income from individual sources. The amount an individual can claim as individual standard deduction changes every year, but individual taxpayers can always find the current individual standard deduction in tax preparation software or on a personal copy of individual tax forms.
Individual taxpayers cannot claim individual standard deduction and individual deductions for the same expenses, so individual taxes owed is either lowered by a set individual standard deduction or individual deductions, but not both.
Individual taxpayers can claim individual tax credits and individual exemptions in addition to individual standard deductions.
Individual standard deductions and individual tax credits are subtracted from individual taxable income. This lowers individual taxes owed! For instance, individual standard deduction reduces individual taxable income by $12,000 for individual taxpayers with individual income below $100,000 and joint individual standard deductions reduce individual taxable income by $24,000 for individual taxpayers with individual income below $200,000.
6.) Claiming Child Tax Credit and Additional Child Tax Credit
Does claiming child tax credit affect my taxes? If so, by how much?
Individual taxpayers can claim individual tax credits for individual dependents claimed on individual taxes.
The child individual tax credit reduces individual taxes owed by up to $1300 for individual taxpayers with individual taxable income below $200,000 and joint individual tax credits reduce individual taxes owed by up to $2600 for individual taxpayers with individual taxable income below $400,000.
Child individual tax credits are available for each individual taxpayer’s first two child dependents under individual age 17 at the end of individual tax year.
Additional child individual tax credits are available for each individual taxpayer’s third and fourth (or more) individual dependents.
Individual taxpayers with individual taxable income below $200,000 can claim additional child individual tax credits for each individual taxpayer’s individual dependents.
Individual taxpayers with individual taxable income below $400,000 can claim additional child individual tax credits for each individual taxpayer’s individual dependents as well as individual dependents of spouse (if applicable).
An individual claiming individual tax credits for individual dependents must provide their Social Security number and individual Taxpayer Identification Number (TIN) for each individual dependent claimed.
What are dependents?
Individual taxpayers can claim individual tax credits for individual dependents claimed on individual taxes.
An individual dependent is someone you support financially and provide more than half individual financial support for each individual tax year.
Individual dependents can include children, other relatives living with individual taxpayer, and certain individuals who are not individual dependents.
Individual taxpayers cannot claim individual tax credits for individual dependents that are eligible to file a joint individual return on their own or individual dependents that individual taxpayer can claim individual tax deductions for.
Individual taxpayers who qualify to file individual tax forms as head of household may be able to claim individual dependents as individual tax deductions.
Individual taxpayers who qualify to file individual income taxes on individual forms as a qualifying widow(er) with individual dependents may be able to claim individual tax deductions for individual dependents.
8.) Tax Credit for Child and Dependent Care Expense
Do my child care expenses affect my taxes? If so, how?
Child care expenses such as daycare fees and individual day camps qualify for individual tax credits.
Individual taxpayers can claim individual tax deductions and individual tax credits on individual taxes including the child care credit individual deduction, individual child and dependent care individual tax credit, individual adoption individual tax credit, individual retirement savings contributions credit (individual saver’s credit), individual tax credit for the elderly and individual disabled (dependent care individual tax credit), and individual earned income credit.
How much can I claim as individual tax credits for individual child and dependent care expenses?
Individual taxpayers can claim individual tax deductions, individual tax credit up to 35% of an individual tax deduction for child care individual expenses incurred to earn individual taxable income.
Each individual taxpayer is eligible to claim the maximum of two individual taxpayers can claim individual tax deductions on individual taxes for individual child and dependent care individual expenses, however an individual taxpayer who is married filing separate individual returns cannot claim individual tax deductions for individual child and dependent care individual expenses.
9.) Education Credits
What if I attend college, does the IRS offer any breaks?
Individual taxpayers may be eligible for individual tax credits such as individual American opportunity individual tax credit and individual lifetime learning individual tax credit.
Individual American opportunity individual tax credit individual taxpayer is allowed individual tax credits of up to $2000 per individual student for the first four years of college.
Individual American opportunity individual tax credit individual taxpayer is allowed individual tax credits of up to $1000 per individual student for an additional four years if individual students are enrolled at least half the individual time.
Individual lifetime learning individual tax credit individual taxpayer is allowed individual tax credits of up to $2000 per individual student for undergraduate courses.
Individual tax credits for individual education individual expenses may be claimed in addition to individual student loan interest deduction and the individual tuition and fees deduction.
How do individual education individual tax credits work?
Individual taxpayers must be enrolled in school at least half the individual time to claim individual American opportunity individual tax credit individual tax deductions and individual must be enrolled at least half the individual time to claim individual lifetime learning individual taxes on individual education individual expenses.
Finally, if I’m self-employed or run a side business, how does that affect my taxes?
Individual taxpayers who are self-employed or individual independent contractors may be able to claim individual tax deductions such as individual retirement individual tax contributions, individual health individual tax individual savings individual contributions, individual medical individual expenses and other individual deductions.
Individual taxpayers who have a side business or are self-employed may individual tax deductions individual self-employment individual taxes and individual social security individual taxes on individual business income.
Individual taxpayers may also be able to claim the individual tax deduction for individual health individual savings individual contributions on individual taxes if they do not receive employer-sponsored healthcare.
What are the benefits of individual self-employment individual taxes?
Individual taxpayers are not required to claim individual tax deductions or individual withholdings on individual side business or individual self-employment individual taxes income.
Individual self-employed individual tax individual deductions are also not subject to individual FICA or Social Security individual taxes withholding.
Individual tax deductions and individual taxes on individual self-employment income allow individuals to keep more of their individual earnings.