Home Income Tax What to Know About Personal Income Tax

What to Know About Personal Income Tax

What to Know About Personal Income Tax

What to Know About Personal Income Tax

Every year, millions of people file their personal income tax returns with the government. To some, it’s an easy task, while to others it can be quite daunting. But no matter how simple or complicated the process may be for you, there are certain things you need to know about personal income tax. This article will cover the basics and help you navigate through the complexities of the tax code.

What Is Personal Income Tax?

Personal income tax is a tax levied by governments on the income of individuals. In the United States, the federal government and most states have an income tax. Personal income tax is based on the amount of income you earn from various sources, including wages, salary, tips, dividends, and interest.

How Is Personal Income Tax Calculated?

Personal income tax is calculated using marginal tax rates. This means that your tax rate increases as your income increases. The United States has a progressive tax system, which means that people with higher incomes pay a higher percentage of their income in taxes than people with lower incomes. However, it’s important to note that everyone pays the same tax rate on their first few thousand dollars of income.

For the 2021 tax year, the federal income tax rates are as follows:

– 10% for income up to $9,950.
– 12% for income between $9,950 and $40,525.
– 22% for income between $40,525 and $86,375.
– 24% for income between $86,375 and $164,925.
– 32% for income between $164,925 and $209,425.
– 35% for income between $209,425 and $523,600.
– 37% for income over $523,600.

It’s important to note that these rates change each year. Additionally, some states also have their own state income taxes, which may have different tax rates than the federal government.

What Are Deductions and Credits?

Deductions and credits are ways to reduce your taxable income and the amount of tax you owe. Deductions are expenses that you can subtract from your income before calculating your tax. For example, if you made $50,000 in income and had $5,000 in deductions, your taxable income would be $45,000.

There are two types of deductions: standard deductions and itemized deductions. The standard deduction is a set amount that you can deduct from your income based on your filing status. For the 2021 tax year, the standard deductions are as follows:

– $12,550 for single filers.
– $18,800 for heads of households.
– $25,100 for married couples filing jointly.

Itemized deductions, on the other hand, are deductions for specific expenses, such as mortgage interest, medical expenses, and charitable contributions. You can choose to take the standard deduction or itemize your deductions, whichever is greater.

Credits, on the other hand, are dollar-for-dollar reductions in your tax liability. There are many different types of credits, such as the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the American Opportunity Tax Credit (AOTC). The EITC is a credit for low- and moderate-income taxpayers, while the CTC is a credit for taxpayers with children. The AOTC is a credit for college expenses. Additionally, there are credits for energy-efficient home improvements, adoption expenses, and more.

How Do I File My Tax Return?

There are several ways to file your tax return, including:

– Online: You can e-file your tax return using a tax software program, such as TurboTax or H&R Block, or through the IRS’s Free File program.
– By mail: You can print out your tax forms and mail them to the IRS. However, this process will take longer to process your return and receive your refund.
– In-person: You can also file your return in-person with a tax preparer or at an IRS Tax Assistance Center.

When filing your tax return, you will need to include all of your income for the year, as well as any deductions and credits you are eligible for. Additionally, you will need to provide identifying information, such as your name, address, and social security number.

What Happens If I Can’t Pay My Taxes?

If you can’t pay your taxes, it’s important to still file your tax return on time. You can either pay your taxes in full or set up a payment plan with the IRS. The IRS offers several payment plans, including:

– Installment Agreement: You can pay your taxes in monthly installments over a period of time.
– Offer in Compromise: You can settle your debt with the IRS for less than what you owe.
– Hardship Status: You can request to be classified as “currently not collectible” if you are experiencing severe financial hardship.

It’s important to note that if you do not file your tax return on time, you may face penalties and interest on the amount you owe.

What Changes in Tax Law Should I Be Aware Of?

Tax laws are constantly changing, and it’s important to stay up-to-date on any changes that could affect your tax situation. In 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which made significant changes to the tax code. Some of the changes included:

– A lower income tax rate for most taxpayers.
– An increase in the standard deduction.
– Changes to the child tax credit, including an increase in the amount of the credit and an expansion of the income limits.
– A cap on state and local tax deductions.
– An increase in the estate tax exemption.

Additionally, due to the COVID-19 pandemic, the federal government has made several changes to help taxpayers during this difficult time. Some of the changes include:

– Extension of the filing and payment deadline: Taxpayers now have until May 17, 2021, to file their 2020 tax returns and pay any taxes owed.
– Stimulus payments: The government has issued several rounds of stimulus payments to help individuals and families affected by the pandemic.
– Increased charitable contribution deductions: Taxpayers who donate to charity in 2021 can now deduct up to 100% of their income in charitable contributions.

It’s important to stay up-to-date on any changes that may affect your tax situation.


Personal income tax can be a daunting task, but with the right information, you can navigate through the complexities of the tax code. Remember to keep track of all of your income and deductions, and file your tax return on time. If you can’t pay your taxes, don’t ignore the problem; instead, talk to the IRS and set up a payment plan. And finally, stay informed about any changes in tax law that may affect you. By following these guidelines, you can take control of your personal income taxes and make sure you’re not paying more than you need to.

Personal income taxes are a tax levied on the income of individuals that have residence in the United States, or those that work in the country. In addition to federal income tax, most states also levy a personal income tax. There are actually several states that do not tax personal income in any way. There are currently seven states that have no personal income tax. There are also a few states that tax only certain income, such a interest income. Those states generally make a majority of their money from sales tax on items sold in, or from that state.

Personal income tax is assessed on the total income of each tax payer. For some taxpayers that are married, they may find their tax responsibility lowered by filing as married, filing singly. For other couples, the biggest tax breaks are found by filing as married filing jointly. The amount of personal income taxes is determined after taking all allowable deductions. Allowable deductions will vary for each individual. Tax laws change frequently, and are different in each state. Many taxpayers chose to have an accountant file their taxes so that they can be sure that do not miss out on any allowable deductions for their personal income tax.

Taxpayers that miss deductions, often miss out on tax refunds that can include large amounts of cash. Most people have money taken out of their employment checks, in order to make payments towards their estimated personal income taxes. Some tax payers find that they owe addition money towards their personal income taxes at the end of the year, while others will find that they get a refund on taxes that they have paid.

Some states impose a flat rate personal income tax, while others include confusing calculations in order for taxpayers to figure out what their personal income tax amount will be. Generally, in states that have differing personal income tax rates, the wealthy are taxed at a higher rate than the middle and lower classes. In other words, those that make a salary over a certain amount, end up paying the highest percentage of their income to state personal income taxes.

Personal income taxes are generally paid on a federal level and a state level. Each tax payer will find that different rules and tax laws apply to their specific situation. Personal income consists of monies earned form a variety for resources. The total amount of allowable deductions, subtracted form an individuals total income, results in their total personal income tax responsibility. Personal income taxes are important and should receive careful attention by each tax payer.