5. Taxes in the USA
- Types of federal taxes:
- Income tax
- Payroll tax (Social Security & Medicare)
- Capital gains tax
- Filing basics:
- Due date: April 15 each year (unless extended)
- Use IRS Form 1040
- Options: File yourself (TurboTax, IRS Free File) or hire a tax professional
- Tax brackets (2025, single filer):
- 10%: up to ~$11k
- 12%: $11k–$44k
- 22%: $44k–$95k
- 24%: $95k–$182k
- 32%: $182k–$231k
- 35%: $231k–$578k
- 37%: Over $578k
- Ways to reduce taxable income:
- Contribute to 401(k), IRA, HSA
- Claim standard deduction or itemize
- Use education, child, or earned income credits
Federal Income Tax Rates (2025)
| Bracket | Single | Married Filing Jointly |
|---|---|---|
| 10% | Up to $11,600 | Up to $23,200 |
| 12% | $11,601–$47,150 | $23,201–$94,300 |
| 22% | $47,151–$100,525 | $94,301–$201,050 |
| 24% | $100,526–$191,950 | $201,051–$383,900 |
| 32% | $191,951–$243,700 | $383,901–$487,450 |
| 35% | $243,701–$609,350 | $487,451–$731,200 |
| 37% | Over $609,350 | Over $731,200 |
State Income Tax Rates (2025, Selected States)
| State | State Tax Rate (%) | Notes |
|---|---|---|
| California | 1–13.3 | Highest bracket applies to income over $1 million |
| Texas | 0 | No state income tax |
| Florida | 0 | No state income tax |
| New York | 4–10.9 | Progressive rates |
| Pennsylvania | 3.07 | Flat rate |
| Illinois | 4.95 | Flat rate |
| Washington | 0 | No state income tax |
| Alaska | 0 | No state income tax |
| Arizona | 2.59–4.5 | Progressive rates |
How to Manage Taxes
- Keep all tax records organized (W-2s, 1099s, receipts)
- File early to avoid last-minute stress and potential penalties
- Contribute to tax-advantaged accounts (IRA, HSA, 401k)
- Use tax software or consult a tax professional for accuracy
- Research credits/deductions you qualify for
- Be aware of tax deadlines and estimated payments
- For self-employed: Track expenses, pay quarterly estimated taxes