Apparently, I currently pay more federal income tax than the bottom 46% combined, but that's another story. :)
The USA has a progressive income tax structure, and (generally) the more you earn, the more you pay.
(Source: Wikipedia)
Contrary to popular belief, you will not suddenly pay more taxes when you get bumped up to a higher tax bracket.
You will most always keep more of your taxable income as it grows.
Your tax return (or additional pay) will be the difference between the income tax and the withheld amount.
To get to the taxable income, you fill out form 1040, or a variation of it.
Income tax = Taxable income x Effective tax rate - Tax credit
Taxable income = Adjusted Gross Income (AGI) - Deductions - Personal exemptions
The AGI is an important number, as it shows up in many place of your tax return.
I think keeping this low is a key strategy when planning for tax benefits.
You can look at the bottom half of the first page of 1040 to get ideas on how.
These are the tax deferred retirement accounts, savings accounts, and such.
For deductions, you can choose standard deductions, or itemized deductions.
Standard deductions is a fixed amount, $12,400 for married filing jointly for 2014.
To itemize your deductions, you will need to file a Schedule A.
You can itemize various expenses, taxes, mortgage interest, donations, etc.
For personal exemptions, in 2014 you get $3,950 per person.
Tax credits are fun.
You get the amount regardless of your tax bracket.
Refundable credits, you get even if you don't owe any taxes!
Next year, I'm planning on having income from Bitcoin mining, so there should be some capital gains involved.
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