The tax tables issued by the federal government and many state governments determine what amount of tax you owe based on your net income after deductions and exemptions. See how your tax status affects your position on the tables in this video on tax basics.
Hello, I'm Sara from TurboTax with important information on how to understand tax tables.
We've all experienced that moment of reckoning when you finally finish your income tax return and the only thing left to do is calculate your taxes using the tables in the instructions. These tax tables are used by the federal government and the 41 states that charge residents income tax. But it's not always clear just from looking at them what factors are affecting your taxes.
Let's use the federal income tax as an example. The tables you find within any tax return instructions are based on two important factors: your taxable income and your filing status.
Your taxable income is important because this is the final number you calculate after reducing your income by the various deductions, exemptions, and exclusions you qualify for.
But this is only half of it. Generally speaking the higher your taxable income, the more you are taxed. Your filing status whether it's single, head of household, married, filing jointly, or filing separately also plays an important role in how you are taxed.
For example, a single filer who has taxable income of $32,000 in 2010 will owe $4,385 of income tax. But another individual filing as head of household with the same income only pays $4,206.
Although you can't change the income you earn during the year, you can ensure you choose the best possible filing status.
When you use TurboTax, we help you get your biggest refund by asking you simple questions, showing you which deductions you qualify for, and recommending the best choices for maximizing your refund. You can even try different filing statuses, filing jointly or separately with your spouse for example, to see which gets you the best results. For more tax tips and guidance, visit TurboTax.com.