Tuesday, January 7, 2014

WHAT PERCENT OF YOUR INCOME DO YOU PAY IN INCOME TAX?


There is a lot of talk in the media and among friends about how much we pay in income taxes in this country, but we have found that most people really do not know the answer to that question.  So that you will have a better idea of how much you are really paying you can find your tax liability on your tax return and divide it by your gross income to determine the percentage you pay in income taxes.  For example, on the 2012 tax return, you could divide line 55 by line 22 from the Form 1040. 

If you want to include Social Security tax in the calculation, which is a good idea, the calculation is a little more complicated.  To include the Social Security tax you would have to add the Social Security withheld from your wages, found in boxes 4 and 6 of your W-2 forms, to line 61 of your Form 1040, and then divide that sum by line 22.

Most people discover that they are paying a smaller percentage than they have been led to believe.  Regardless of what you find as your answer, at least you will be dealing with facts instead of impressions or media hype.
 
 
Loren L McCann, CPA, MS (Tax)

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