A frequent, sarcastic remark among dissatisfied civilians is, “that’s your tax dollars at work!” This is commonly spoken by people who feel the government is using their money unwisely; often in relation to too many workers standing around on a road crew project or snow plows driving on dry roads.
Regardless of how you feel about government spending, your taxes are due each and every year and can take a significant portion of your earnings. So how much of your hard-earned cash are they socking away? Included here are a few things to know about your taxes and how they are paid each year.
For most homeowners, property tax is the norm and is paid through escrow twice a year. The total amount of property tax you pay in a given calendar year is based on the assessed value of your home and your geographical area.
The more desirable your home location, and the greater your home’s amenities, the higher your property tax. Similarly, people who live in rural areas with fewer renovations performed on their homes will likely be facing a significantly smaller property tax each year.
One of the hardest hitters, applicable to nearly every American, is income tax. The tax percentage taken is calculated based on your total income for the year. If you make more, you will lose a larger percentage of it, and vice versa.
Keep in mind that if you are filing jointly with a partner, their income could make your tax withholding higher. This could mean you will end up owing at the end of the year instead of getting a tax return. Many people choose to have an additional amount withheld from their paycheck each pay period so that they don’t face a large bill come April.
If you don’t make a large amount of money each year, you may be able to avoid filing your taxes altogether. There is a set amount for retired, single and married individuals; including lower earnings for heads of households. If you feel you are under the required income ratio, find an IRS calculator online.
Exempt income is money you earn that is not subject to Federal Tax Withholding. Municipal bond income, retirement benefits and gifts under $10,000 all qualify under the umbrella of exempt income. IRA distributions, academic scholarships and certain death gifts can be exempt from this tax as well.
Each year, every man, woman and child are eligible for a set personal exemption amount. That means this exemption will remove a certain amount of income from their billed taxes and allow them to avoid taxation. This exemption is designed to allow individuals a set amount of money for basic sustenance items such as clothing, shelter and food.