Taxes are unavoidable and without planning, your annual federal tax liability can be very uncertain. Proper planning is especially important with the change in tax law under the new Tax Cuts and Jobs Act recently signed into law by President Trump. Use the following income tax calculator to help you estimate your 2018 federal tax liability along with your average and marginal tax rates. This calculator will also help you know how to calculate tax deductions, which have also changed with the new law. After calculating, look further at the changes in 2018 to the federal income tax brackets and rates.
With the new tax law comes changes to itemized deductions. If you are unsure whether to itemize or take the standard deduction, our calculator will help to answer that question.
How Much Income Taxes Will I Have to Pay?
Your income tax will depend on several factors, including your income and your tax bracket. Tax brackets work by dividing income levels into groups, based on yearly income. Therefore, someone earning $7,000 per year would be in a lower income tax bracket, while someone with a salary of $400,000 per annum would be in a higher tax bracket.
The United States has a progressive tax system, meaning those in higher income tax brackets are charged more in income taxes. Someone in the lowest tax brackets may only need to pay 10% in income taxes, while someone in higher tax brackets might need to pay 30%. This is based on the notion that someone who is earning more can afford to pay more. The tax rates for each tax bracket can change, depending on current legislation.
The exact amount you will need to pay will also depend on deductions. These are legal things you can declare on your tax forms to reduce your tax burden. For example, if you are earning $100,000 per year but have deductions of $10,000, you will pay taxes on $90,000 in income.
Why Calculate Your Taxes?
Using an income tax calculator tool is one way to determine your tax liability. You can also examine last year’s tax returns, assuming your income did not dramatically change.
There are a few reasons why it’s important to evaluate your tax responsibility:
- To determine how much you will need to set aside for your taxes if you are self-employed. You may need to pay installments, and you will want to save for those installments.
- To evaluate whether your tax withholdings are adequate or too high. Adjusting your withholdings correctly ensures you have enough money for your needs without having to pay a big tax bill in the new year. However, withholding too much from your paycheck isn’t good either since it prevents your money from be put to work elsewhere.
- So you understand how much income you have. Understanding how much you have to pay in total can help you make important financial decisions because it will help you determine how much money you will have in your pocket.
- So you can create a tax plan. If you realize you are paying a lot in taxes, you can work to ensure you use all the deductions for which you are eligible, as well as other solutions to keep your tax liability low.
Be sure to check out all the useful calculators from Money Help Center. We are not associated with any one brand, so our calculators are unbiased. Of course, they are also always free, so you don’t have to worry about paying money to get the information you need.