Effective income tax for a single person with $40,000 gross income.

[LiberalFighter]

This is for the 2009 tax year. (edited)

$5,700 standard deduction
$3,650 personal exemption
- - - - - - - - - - - - -
$40,000
$ 9,350
-------
$30,650 taxable income

($ 835) The first $8,350 is taxed at 10%
($3,345) The remainder of $22,300 is taxed at 15%

($4,180) Total income tax

10.45% Effective tax rate. The taxpayer is not taxed at 15% of all income or all taxable income.


Notice how the income is also taxed at two different rates?

A taxpayer with about 6 years or more on a 30 year mortgage will likely itemize their deductions resulting in more than $5,700 standard deduction.

A married couple with or without kids or a single person with kids will have more exemptions to claim.

Taxpayers with income over $200k likely have deductions in the $64k range.

[customerserviceguy]

1. Ok, your math is correct

Now what was your point?

[LiberalFighter]

2. How many do you think know how their income is taxed?

Not many. Even here not many.

And supporters of having the top 2 tax brackets kept as they are too because they won't benefit. But that is a lie. Those above $250k will have income that those below $250k taxed at the same rate.

[customerserviceguy]

3. Ok, good point

But lost on me, because I used to be enrolled to practice before the IRS. While I haven't kept up on my training since about 1990, I still know how taxes work.

But your point on others not knowing about how tax laws work is well taken. It just didn't seem to be stated in your OP.

[prolesunited]

4. Thanks for doing the math

Another poster was arguing she was paying $800 a month on a $40,000 salary and it didn't seem to add up to me.

[Tyrone Slothrop]

5. They were probably including state & local taxes as well as FICA n/t

[FBaggins]

7. $800 is a reasonable approximation

for a single person making $40k - if you include Social Security plus state and local taxes.

[FBaggins]

6. This individual pays no SS taxes?

And has no health insurance or 401(k)?

Or state/local/pers prop taxes?

[prolesunited]

8. He never said total deductions

He said INCOME tax and clearly referred to federal tables, although those are dependent on filing status, so perhaps he could be clearer on that point.

Including any other taxes is not very useful because that is going to vary widely depending on where a person is located. Some states have no taxes and other states have high taxes. And just like you can control your personal property taxes by what you elect to purchase, you can control state and local tax payments by where you opt to live.

It seems like you are trying to throw in a bunch of other things to purposefully cloud the issue.

And putting in things like health insurance and 401(k) plans is just ludicrous. Payment of either is NOT mandatory and the person paying those optional expenses derives a clear benefit.

On edit: You obviously saw what a weak case you were making and changed your post.

[FBaggins]

9. I think you missed my point.

Those are all deductions from gross income to get to taxable income.

IOW, the $40k gross income individual would pay much less in federal income tax than the OP calculated. Since (from other posts) it appears that the calculation was the point of the exercise... it seemed useful to flesh out the example.


On edit -

On edit: You obviously saw what a weak case you were making and changed your post.
The post was edited to include an additional category (that most pay) that reduces taxable income. The edit took place mere seconds from when I made the original post (and over an hour before you replied)... so what do you think I was hiding?

[Hansel]

10. You forgot FICA. It's 18.1%. nt

[dsc]

11. You forgot Social Security taxes

which way ups that rate. The rate goes from the 10.45 to 18 with a marginal of over 20. that is why I get so irate over the low capital gains rate. I actually pay a higher marginal rate than a trust fund baby.

[Abq_Sarah]

12. On top of the 15.3% SE tax

If you're self employed.