Federal and State Income Taxes
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Federal and State Income Taxes
Federal, state, and local income taxes are automatically taken out of your paycheck every time you are paid. State and local income taxes are deducted based on a flat, fixed tax rate. For federal income taxes, the rate depends on your tax filing status and the number of withholding allowances you choose when you fill out federal tax withholding forms like the W-4.
Things To Know
- The various statuses include married filing jointly, qualifying widow or widower, head of household (if you have one or more qualified dependents living with you during the tax year), single, and married filing separately.
Federal and state taxes
The federal tax rate you pay will vary depending on your filing status. The various statuses include married filing jointly, qualifying widow or widower, head of household (if you have one or more qualified dependents living with you during the tax year), single, and married filing separately. Your tax forms will explain what each of these mean.
Getting started with the W-4
Every year, you fill out a federal Form W-4 withholding form, which is provided by your employer. On that form, you state your filing status and the number of withholding allowances you wish to claim. Your filing determines which tax bracket you fall in and is based on whether you are single, married, head of household, or a surviving spouse. Withholding allowances are the personal exemptions you are allowed to take based on the number of people and dependents residing with you. For example, if you are married and have two children, you would generally fill out your W-4 form with four exemptions, since that is what you are entitled to take under IRS law (you get to include yourself as an exemption). The more exemptions you have, the less federal and state income tax is withheld from your paycheck. Your employer uses your W-4 form to determine what percentage of federal and state income taxes to withhold from your paycheck.
State and local taxes
For both local and state income taxes, you pay tax based on the state and locality where you work, rather than where you live. States that levy an income tax generally set a flat rate based on the amount of income you earn, as do local governments that levy an income tax.
