Rate Your Tax Bite
Craig
Hackler, Financial Advisor,
Raymond
James
Financial
Services
On average, many Americans do not know the percentage of their income that
goes to paying taxes. Most associate taxes with income taxes and rarely take
into account Social Security tax, state sales taxes, and other non-income taxes.
The chart below will enable an individual to estimate his/her "effective
rate" of tax w i.e., how much income really goes to paying taxes of various
kinds. It is important that individuals understand the impact taxation has on
achieving their financial goals. In order to get started, an individual will
need a copy of his/her most recent federal and state income tax returns, along
with his/her W-2 and 1099 forms for the same year. To estimate the percentage of
income paid out in taxes, fill in the amounts indicated below.
Gross Income $_____________________________
This includes salary from all W-2s for both spouses, interest
and dividend income from the 1099 forms, Schedule C net income,
and any income from partnerships, S Corporations, or other business
interests that appeared on the income section of your return.
Your Total Federal Tax $_____________________________
From Form 1040, Line 54-includes income tax, self-employment tax,
and alternative minimum tax, if applicable.
Your total state income tax
$_____________________________
Includes amount(s) shown on state income tax returns.
Your FICA Tax
$_____________________________
Write the amount of Social Security tax and Medicare tax withheld:
this is shown on your W-2. Note that if you are self-employed, your
self-employment tax (Social Security and Medicare tax for the self-
employed) is included in the "total federal tax" item above.
Real Estate Tax
$_____________________________
From Schedule A of your tax return, or from real estate tax bill.
Sales Tax
$_____________________________
Multiply your Gross Income by 1/3 (an estimate of the average
taxpayer's "disposable income"); then multiply that amount by the
applicable sales tax rate for your state.
Total Taxes
$_____________________________
Add together all the taxes you have paid.
Effective Tax Rate
$_____________________________
Divide Total Taxes by Gross Income. This is an estimate of your
effective tax rate.
It should be emphasized that this is merely a general discussion on
estimating an individual's effective tax rate. If you are interested in
completing a thorough analysis of your own tax situation consultation with a
financial advisor or tax professional is recommended.
Craig Hackler holds the Series 7 and Series 63 Securities licenses, as well as the Group I Insurance license (life, health, annuities). Through Raymond James Financial Services, he offers complete financial planning and investment products tailored to the individual needs of his clients. He will gladly answer your questions. Call him at 512.894.0574 or 800.650.9517
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