🗓️
Updated: March 27, 2023
We adhere to strict standards of editorial integrity to help you make decisions with confidence. Please be aware that some (or all) products and services linked in this article are from our sponsors.
Taxes Your stress-free guide to filing
Get tips on filing, what deductions to take, and the best software to use.
🗓️
Updated: March 27, 2023
We adhere to strict standards of editorial integrity to help you make decisions with confidence. Please be aware that some (or all) products and services linked in this article are from our sponsors.
We adhere to strict standards of editorial integrity to help you make decisions with confidence. Please be aware that some (or all) products and services linked in this article are from our sponsors.
The thought of filing can lead to nightmares of numbers and paperwork.
But with some knowledge and planning, you’ll find that the process isn’t as hard as you might fear.
From the forms you need to the deductions you can make, we’re here to make your tax filing process as easy as possible.
When are taxes due this year?
The deadline to file your 2022 taxes is April 18, 2023.
Need more time? To request a 6-month extension on your taxes, you’ll need to file Form 4868. Be sure to pay what you estimate you will owe in taxes to avoid penalties and interest. Your completed taxes will have a new due date of Oct.16, 2023.
First-time tax filers
Filing your taxes for the first time can be a little intimidating. But really, there’s nothing to be afraid of. And with the possibility of getting some money back at the end of the process, you’ve got even more reason to get it done.
There are three levels of taxes that you may be responsible to pay: federal, state, and municipal (local). You’re responsible for filing these taxes each year.
Unless your income falls below a certain level, everyone needs to file federal income tax. State taxes are applicable in 43 states, and many municipalities require you to pay annual taxes as well.
Here’s all you need to know to get your taxes filed correctly and on time.
Factors that affect how much you pay in taxes
The money you pay in taxes goes to funding government programs and services, like the U.S. military, law enforcement, education, health care, and Social Security. How much you’ll pay in income tax depends on many factors.
- Taxable income: The more money you make, the higher the tax bracket you’ll be in. That means that you’ll have to pay a higher overall percentage of your earnings to taxes.
- Filing status: Your marital status affects how much you pay in taxes. When filing taxes you have to state if you’re single, married and filing jointly, married and filing separately, widowed with a dependent child, or ‘head of the household.’ The last example is for when you’re unmarried but have at least one dependent and pay more than 50% of the household expenses.
- Age: Depending on your age, you might be entitled to special tax breaks. If you’re 19 or younger, you may be able to report your earnings on your parent’s return. Similarly if you’re a full time student under 24.
- Other factors: The amount you pay in taxes can be affected by things like if someone else is claiming you as a dependent, if you’re able to claim any deductions like medical expenses, and any credits you might be entitled to.
Information and documents needed to file
When you file your taxes, you need to ensure you have all the documents required on hand. These documents give the government everything they need to figure out how much you owe or will get back from your taxes.
- Your Social Security number: One of the most important pieces of identification that you have. Your SSN is used to track your financial information.
- W-2 form(s): Your W-2 is your annual wage and tax statement. Your employer has to provide this to you by Jan. 31.
- 1099 form(s): These are forms that show money you earned from a source other than an employer — such as freelance work or interest earned on a savings account.
- Tax forms from any retirement accounts: The amount you’ve contributed to your retirement accounts are eligible for tax deductions, so be sure to keep record of this.
- List of educational or classroom expenses and any unreimbursed medical bills: Things like school tuition and fees are eligible for tax credits. So are some medical expenses if they weren’t reimbursed and total more than 7.5% of your adjusted gross income.
- Amount paid toward property taxes and mortgage interest: If you itemize your deductions, you can deduct some of these taxes.
- Charitable contributions: Not only is giving to charity a nice gesture, but it also gives you a deduction on your taxes. Be sure to keep receipts and be prepared to itemize your contributions to get the credit.
- Amount paid in state and local taxes: Income, sales, and property tax is deductible up to a combined limit of $10,000 (or $5,000 if you’re married and you and your spouse file separate returns).
One of the most important forms you’ll need to file your taxes is Form 1040. This is the main form you use to declare your income, deductions, and credits. It’s also the form that will tell you how much money you owe - or hopefully get back.
There are a few other forms you might have to fill out when filing your tax return:
Schedule A: If you choose to itemize your deductions, you’ll need to fill this out. Take time to weigh the options of itemizing them yourself or taking the standard deduction.
The IRS provides a helpful tool that can help determine what your standard deduction would be.
Schedule B: This is required if you have taxable interest or dividends above $1,500.
Schedule C: Fill this out if you have profits, losses, and expenses from a freelance job or as a sole proprietor.
Schedule D: Use this if you have gains and losses from investing in stocks, bonds, and more.
Form 1098: If you want to deduct mortgage interest payments above $600, you’ll need to complete this. Your lender can provide this for you.
How to file your taxes
If you’re not sure how to actually file your taxes, luckily there’s quite a few options available to you.
If this is your first time filing taxes, you might not want to tackle all the paperwork yourself. You don’t want to risk making any mistakes on your return - mistakes that could cost you money.
No matter what approach you take, you want to start your tax return early. The IRS charges a 0.5% late payment penalty every month if you miss the deadline, but there are other reasons to start early.
Rather than face the last minute stress of trying to assemble all of your paperwork, starting early lets you ensure you have everything ready to enter into the forms or hand off to a tax specialist.
Do it yourself
If you’re interested in taking a DIY approach to your taxes, it’s an opportunity to get a close-up view on your finances. This can help you out if you’re trying to better understand your budget or want to come up with a financial plan.
All the forms and instructions you might need are available online, so there’s no need to wait until tax season to start getting things in order.
Using the IRS
The IRS also offers free fillable forms online that allow you to easily enter the info you need.
If you have any questions along your journey of self-filing, be sure to consult the IRS Interactive Tax Assistant (ITA). There, you’ll be able to get answers to most of your tax-related questions.
Tax software
If you want a more guided approach to completing your tax return, using tax software is a great option.
Tax software simplifies filing your federal and state tax returns, and ensures you take advantage of any money-saving opportunities available.
Tax software is also generally less-expensive than going to a tax-professional. If your taxes are straightforward, you might even be able to get them completed online for free.
Tax specialists
Using a tax specialist or tax accountant will cost you more than your other options, but the expense can be worth it.
If you have a particularly complicated tax return — for instance, if you worked both for an employer and as a freelancer — a tax specialist can help maximize your deductions.
Hiring a tax professional can save you time and can help you avoid being audited by the IRS. The money that you spend on hiring a tax professional also counts as a business write off, so if you’re self-employed or are incorporated, hiring one makes a lot of sense.
Tax brackets
The amount of money you make determines what tax bracket you fall in. The more money you make, the more taxes you pay.
Taking advantage of deductions and tax credits helps to lower your taxable income, and can definitely be worth it if you’re on the border of a higher tax bracket.
For 2022, here’s how the tax brackets will work:
- If you file as a single and had a low adjusted gross income of $10,000 last year, your tax rate is 10%
- If you file as a single and had adjusted gross income of $85,000 in 2022, you pay:
- 10% tax on the first $10,275
- 12% tax on the next amount, up to $41,775
- 22% tax on the final portion, up to $85,000
If you and your spouse file your 2022 taxes jointly and had adjusted gross income of $600,000 last year, you pay:
- 10% tax on the first $20,550
- 12% tax on the next slice, up to $83,550
- 22% on the portion going up to $178,150
- 24% tax on the next section, up to $340,100
- 32% tax on the portion after that, going up to $431,900
- 35% tax on the final chunk, up to $600,000
As you earn more money, you'll want to take steps to reduce your taxable income and drop down into a lower top tax bracket. Directing some of your earnings into an individual retirement account (IRA) or 401(k) retirement savings can help accomplish that.
Be aware that for the tax year 2023, it is projected that the income tax brackets will be higher due to the ongoing COVID pandemic.
2022 income tax brackets
For 2022, the tax brackets have changed and they may change again before the year ends. That’s to prevent Americans from being pushed into a higher tax bracket due to record-high inflation. The changes are expected to be announced by November, but until then, here is a breakdown of what tax brackets look like right now.
For individual taxpayers
Portion of Income
Tax rate
Up to $10,275
10%
$10,276 to $41,775
12%
$41,776 to $89,075
22%
$89,076 to $170,050
24%
$170,051 to $215,950
32%
$215,951 to $539,900
35%
$539,901 and higher
37%
For couples filing jointly
Portion of income
Tax rate
Up to $20,550
10%
$20,551 to $83,550
12%
$83,551 to $178,150
22%
$178,151 to $340,100
24%
$340,101 to $431,900
32%
$431,901 to $647,850
35%
$647,851 and higher
37%
2021 income tax brackets
Still need to file for last year? For taxes due in 2022, reflecting income earned in 2021, the tax brackets are as follows:
For individual taxpayers
Portion of income
Tax rate
Up to $9,950
10%
$9,951 to $40,525
12%
$40,526 to $86,375
22%
$86,376 to $164,925
24%
$164,926 to $209,425
32%
$209,426 to $523,600
35%
$523,601 and higher
37%
For couples filing jointly
Portion of income
Tax rate
Up to $19,900
10%
$19,901 to $81,050
12%
$81,051 to $172,750
22%
$172,751 to $329,850
24%
$329,851 to $418,850
32%
$418,851 to $628,300
35%
$628,301 and higher
37%
Test your tax knowledge
What is the average IRS tax refund amount given for the 2022 tax season?
Tax credits vs. deductions
Paying taxes isn’t fun, but paying less in taxes makes it a little better.
Knowing how to use tax deductions and tax credits can save you money - but first you have to know what deductions and credits are.
Tax credits are used to reduce the amount of tax you pay or give you a greater refund. Even if you don’t owe taxes, some credits will still give you a refund. You can still claim tax credits even if you choose to take the standard deduction.
Deductions are used to reduce your total amount of taxable income. Deductions are made to your income to help reduce the amount of taxes you owe. When it comes to deductions, you have two main choices, the standard deduction, or itemized deductions.
Standard deduction vs. itemized deductions
Standard deduction
A standard deduction is a prescribed amount based on the standard deduction set by the federal government plus deduction amounts for your age and other factors. It’s estimated that 90% of Americans choose to use the standard deduction.
Itemized deductions
You are required to list all the items you wish to claim as a deduction on your taxes. This process involves keeping original copies of receipts that you will submit along with your tax return. If you itemize, you might be able to claim things like property tax, real estate tax, and charitable contributions.
Commonly used tax breaks
When it comes to using tax deductions and credits, you may be wondering where to begin.
Here are some of the most common tax breaks and deductions you can use to your benefit:
- Medical and dental expenses: Once you’ve hit more than 7.5% of your adjusted gross income in medical expenses, you can deduct certain unreimbursed expenses
- Student loan interest: You can deduct up to $2,500 of the interest you pay your loan annually
- Charitable donations: You can write off up to $300 in cash donations ($600 for married couples who file jointly) to qualifying charities
- Child-care expenses: With the Child and Dependent Care Expenses credit, you might be able to claim some of the cost of putting your child in daycare
Remember, to take advantage of certain deductions, you’ll have to itemize your deductions instead of taking advantage of the standard option.
More: 9 overlooked tax breaks and deductions
Income taxes
When you work, some of the money you make goes to the government. The money that’s taken off is called income tax.
Income tax is used to fund things like social security, federal and state government, the military, and health care.
The amount you pay in income tax depends on the amount of money you make. The more income you receive, the higher the tax bracket you’ll fall in.
What is adjusted gross income?
When it comes to your tax return, one of the most important numbers is your adjusted gross income, or AGI.
So what is that, exactly?
Your AGI is your gross, that is pre-tax, income - minus some “adjustments.” It’s used to determine how much of your income is taxable.
Your AGI is composed of your salary, wages, and things like dividends and capital gains.
States with no income tax
If you’re thinking about moving to a different state, these ones offer a pretty sweet incentive: no state income tax.
Alaska: Alaska has no state income tax and no state sales tax. While that may be appealing, the high cost of housing, food, energy, and health care offsets this incentive.
Florida: While Florida has no state income tax, it has a substantial sales tax of 6%.
Nevada: The Silver State has no personal income, corporate income, or inheritance taxes, and some of the lowest property taxes in the country. Despite this, it has the seventh-highest state tax and sixth-highest gasoline tax in the country.
New Hampshire: Not only does New Hampshire not tax residents’ wages, but it also has no state or local sales tax. It makes up for these low taxes by having the third-highest property tax rate in the nation.
South Dakota: South Dakota has no income, inheritance, or estate tax, and enjoys low state and local tax. It makes up for any monetary shortfall by taxing alcohol, tobacco, and fuel, in addition to high property taxes.
Tennessee: Instead of paying income tax, residents of Tennessee pay a 7% state sales tax plus an average local sales tax of 2.55%.
Texas: The Lone Star State has no state income tax, but charges high sales and property taxes. It has the sixth-highest property tax rate in America, and the average local and state sales tax totals 8.20%.
Washington: Washington has the fourth-highest sales tax in the nation, and levies a 7% tax on the capital gains of high earners to make up for not having state income tax.
Wyoming: Wyoming proves to be one of the best states to live in if you want to keep more money in your pocket. It has a lower-than average cost of living, and no personal, corporate, or retirement income tax. It also has low state and local taxes, and a low 5.22% sales tax.
Ask the eight ball
Want to learn more about the world of taxes? Shake the sphere for eight financial facts.
For fun tax facts
How much of my paycheck goes to taxes?
When you start working for an employer, you fill out an Employee’s Withholding Certificate, also known as Form W-4. This lets your employer deduct the right amount of federal income tax from your pay. If you overpay in deductions, you get a refund at tax time; if you underpay, you’re going to have to pay a penalty.
Different elements affect how much tax is deducted, like if you’re married, have a child, and the amount of income you make.
The amount of income tax taken off on your paycheck can be between 10% for low-income earners to 37% for high income earners.
On top of income tax, 6.2% of your income is deducted for Social Security taxes. This amount is matched by your employer. You only pay this tax on the first $147,000 of your income in 2022.
Additionally, 1.45% is deducted for Medicare taxes. If you earn over $200,000, you’ll pay an additional 0.9%.
What’s your take-home pay on a $100,000 salary after taxes?
A salary of $100,000 seems like a comfortable amount to live off of. But when you take into account taxes, that sum quickly shrinks.
So how much is your take home pay when you make $100,000 a year?
The amount you’ll take home depends on where you live since federal and state taxes combine to different amounts. On the high tax level, if you live in Oregon, you’ll only take home $67,110 after you’ve paid your federal and state taxes.
On the low tax level, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming would have you take home $75,277 of your hard earned dollars after tax.
Keep in mind that these states with lower income tax make up for the money lost by often having higher sales tax and property tax.
Your tax questions answered
Latest Articles
![Best Tax Software to File With [September 2023]](http://media1.moneywise.com/cdn-cgi/image/fit=cover,g=left,width=1140,height=507,f=auto,quality=90/cp_default_hero.jpg)
Disclaimer
The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.