Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
It only seems like a lot because you don't have investment income or any real deductions to speak of, plus you aren't married. As your investment portfolio grows your effective tax rate will go down because capital gains have lower tax rates. If you ever run your own company you will also access a plethora of tax benefits that aren't available to employees.
However, as I stated earlier, the USA has ridiculously low tax rates compared to other first world countries. To be sure, FICA is a pain, but someone has to pay for seniors. BTW, you are only paying half of the FICA taxes, your employer pays the other half.
Hey lycos, could you tell me a little bit more about the company? I have my own software company. It's not doing very good but it earns me $300 a month at least. It's a Micro-ISV company, meaning it's created and ran by me only. Would that count for anything?
You say you own a company and make $300 a month? How many years or months has this been going on? Are you deducting taxes, Social Security, etc. from that $300 a month and paying it? If not, then you owe back taxes and can be penalized not just for back taxes, but penalties for underpaying.
And, that $300 per month now has to be added to your gross salary, which will increase your taxable income and you will now owe MORE dollars per month than was just shown on your paycheck.
Tax rates vary for several reasons. Yes, you've calculated your total burden. However, the figures for each part of the bill seem about right. Yeah, it sucks, if you were collected carried interest or dividends you'd be taxed at a lower rate. It's kind of funny that way, because it is morally bankrupt.
However, you are on pace for 60k/year, which for a single person living in Arizona is enough for a very nice life. You are however stuck in the middle class trap. Most tax deduction/credits won't be of much use to you. You won't be eligible for the saver's credit or the earned income tax credit, but you also still get your income from regular wages which are taxed at relatively high rates.
Some things that would help: If you're planning to stay in one place for the next decade, buying your house rather than renting has a very positive impact on networth. With the current rates, it is much cheaper. Putting money into your IRA account would be a very good idea, when it comes out you won't owe taxes on the gains/dividends/interest. If you do that, just stick it in a S&P 500 index. Don't try to outsmart the market.
I do my taxes with turbo-tax every year. I'm getting fairly good at understanding the taxes.
When we blame Obama for supporting welfare, don't forget to blame the administration for using tax breaks for the rich to encourage investment. After all, if giving money back to poor people is a handout, then giving a large tax deduction based on being rich is also a handout. If we are going to blame welfare, lets blame walmart for having their labor cost subsidized as they provide wages that would not support living in this country without those welfare programs.
PS. If you were able to work for the government, or in some places the state (don't know AZ law), you might be able to avoid social security. My wife works for the state of Colorado. No social security. Sure it means we won't get paid as much by social security when we get older (because the formula looks at how much you paid in), but social security at best will pay 1% real return (over inflation) for the average employee. Now, she might live longer and get more benefit, but there is also a significant risk that by the time we retire we will find out we are only getting half of what we paid into it.
PPS. Sorry you don't like the tax bill. It is low relative to other countries. On the upside, you are young enough to not understand taxes and some company saw fit to pay you nearly 60k per year, which boggles my mind a bit given the amount of talent that is available at lower wages. No offense, but there are tons of people that would love to be in your situation.
You are allowed some tax deductions for moving expenses to get a job more than fifty miles from your previous residence unless, your new company provided moving expenses as a part of the deal. Keep all your receipts. Medicare and social security are a fixed federal tax from the first dollar you earn. Your employer, also, pays into SS and medicare. AZ, your state tax is also, a fixed % but AZ may allow some deductions when you file. If your company provides health insurance, you save a little by having the premiums deducted pre-tax. Sadly, it is way too possible, you may owe a few bucks at the end of the year.
Hey lycos, could you tell me a little bit more about the company? I have my own software company. It's not doing very good but it earns me $300 a month at least. It's a Micro-ISV company, meaning it's created and ran by me only. Would that count for anything?
What I mean is the tax code is geared towards companies. Presumably to foster entrepreneurship.
A few examples,
Need a computer? Employees can't write off the cost.
Need software? Employees can't write off the cost.
Transportation costs? Employees can't write off the cost unless they itemize, but you need alot of expenses to take advantage of itemizing.
Vacations can't be written off, but a company can have a "corporate retreat" that is fully deductible.
Buying a house would be the best way to start lowering your tax bill, but I wouldn't recommend buying a house solely to reduce your tax bill.
Not really. When my spouse and I were both working we added up all taxes so besides income/employment tax we calculated property taxes, sales taxes, various excise taxes, etc. Even though we were clearly middle class we paid well over 50% of our earnings in taxes.
IMO we have much too much government in this country with bureaucracies at every level from local up to federal allocating funds in inefficient and wasteful ways.
Welcome to the real world of adulthood. It's a shame that your parents didn't prepare you for living in it. Taxes pay for all that stuff like roads and bridges, police and fire protection and if you lose your job-------unemployment.
Do you expect your tax burden to be less than everyone else?
Not really. When my spouse and I were both working we added up all taxes so besides income/employment tax we calculated property taxes, sales taxes, various excise taxes, etc. Even though we were clearly middle class we paid well over 50% of our earnings in taxes.
IMO we have much too much government in this country with bureaucracies at every level from local up to federal allocating funds in inefficient and wasteful ways.
Saw a good story in the newspaper once.. Talked about how much would be saved if they just combined all the different taxes into the income tax then there would be massive savings by reducing all the money spent on all the bureaucracies.
However he said there is one big reason why they don't do this.. Because then we would know how much we actually pay
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
