The Casaplorer income tax calculator provides an estimate for your 2020 annual income taxes on both a federal and state level. Tax rates are applied marginally, which means you pay different tax rates for each portion of your income. You can use our simple calculator to get an estimate of your income tax liability.
Adjusted Gross Income and Taxable Household Income
Adjusted Gross Income: Your adjusted gross income is the portion of your gross income that is subject to state and local taxation. It is calculated by adding all of your taxable income sources and subtracting any “above-the-line” adjustments. This can be very different from your gross household income, so you should do a formal calculation, but you can start with an estimation. Below is a list of the most common gross income sources and adjustments.
|Taxable Income Sources||Above-the-Line Adjustments|
Taxable Household Income: Your taxable household income is the portion of your gross income that is subject to federal taxation. It is calculated by subtracting a standard or itemized tax deduction from your adjusted gross income. While your state and local taxes are calculated using your adjusted gross income, your federal taxes are calculated using your taxable household income.
Tax deductions are eligible amounts that you can use to reduce your taxable income. If you pay state taxes, you may have access to a standard deduction. When filing your federal taxes, you can choose to use a standard deduction or an itemized deduction. To get the maximum benefit from your tax deduction, you should calculate both your standard and itemized deductions, then use the largest one.
A standard deduction is a flat dollar amount you can deduct from your adjusted gross income (state) or taxable income (federal). By reporting a lower income, you can pay less taxes on that income.
The standard state tax deduction is the only deduction you can make on your state taxes. There are 32 states with a standard deduction. State tax deductions are only applied to your adjusted gross income for the purpose of calculating your state taxes. You cannot use the state tax deduction to calculate your taxable income because, in many cases, the state tax deduction is the same as the federal tax deduction.
The standard federal tax deduction is used by most taxpayers because it is very simple to calculate. The standard deduction is also very generous because of the Tax Cuts and Jobs Act (TCJA). In many cases, a standard deduction is more beneficial than an itemized deduction.
|Filing Status||Allowed Standard Deduction|
|Head of Household *||$18,650|
|Married or Qualified Widow(er)||$24,800|
|Senior (Age 65+) or Blind||Additional $1,300 for Married or $1,650 for Single|
The itemized deduction is a tax deduction calculated using specific tax deductible expenses. Calculating this deduction is much more complicated because you must find all eligible deductions and fill out a Schedule A. However, in some cases, you could end up saving more than you would with a standard deduction.
These deductions are split into 6 categories:
- Medical and dental expenses
- State and local taxes (Maximum $10,000)
- Interest expenses (Eg. Mortgage interest)
- Charitable Donations
- Casualty or theft losses
- Other deductions including gambling losses, unrecoverable pension investments, etc.
Components of Income Tax
Federal and most State income taxes use a progressive tax rate, which means your average or effective tax rate will be lower than your marginal tax rate. Your average tax rate is the amount of taxes you pay relative to your total taxable income and your marginal tax rate is the tax rate applicable to an additional dollar on income. Income tax rates are applied at different tax intervals.
Federal Income Tax
The federal income tax is applicable to any taxable income earned within the United States and ranges between 10% to 37%. As your taxable income increases, the tax rate only increases for the amount in each of the 7 income brackets depending on your filing status. There is a separate tax schedule for capital gains and dividends. Each year, tax brackets are increased slightly to adjust for inflation.
State Income Tax
The state income tax is applicable to any adjusted gross income earned within your state. Most states use a progressive tax rate like the federal income tax. However, some states have a fixed tax rate (does not depend on your income) and some states have no state taxes at all.
States with No Income Tax - You will still have to pay the federal income tax:
- South Carolina
- South Dakota
Local Income Tax
Some counties will have an additional income tax that can be applied in many different ways. This includes a flat tax rate, a fixed tax amount, a percentage of your state tax liability, or a tax on interest and dividends. Only some municipalities within states have local income taxes, so you may be paying different taxes than someone even in the same state. If you belong to any of these 17 states, you may pay a local income tax:
- New Jersey
- New York
- West Virginia
The Federal Insurance Contributions Act (FICA) is a U.S. law that combines the mandatory social security tax and medicare tax. The social security tax and medicare tax are marginally applied on your adjusted gross income. The social security tax is 6.2% on the first $137,700 of your gross income and 0% for any income above $137,700. The medicare tax is 1.45% on the first $200,000 and 2.35% for any income above $200,000.
For self-employment income, you can deduct half of the total FICA tax (7.65%) when you file your tax return. This is an above-the-line adjustment, which means it applies before your federal income tax deductions.
Certain individuals are eligible for FICA tax exemptions, which include:
- Students employed by their school, college, or university
- Foreign government employees
- International students, scholars, professors, teachers, researchers, physicians, au pairs, summer camp workers, and other aliens
- Certain religious groups (Eg. Amish) → You will be unable to receive Medicare and Social Security Benefits
Earned Income Tax Credits
Tax credits allow you to directly reduce your tax liability. For example, if you owe $500 dollars in income taxes and have a $300 tax credit, you can reduce your income taxes to $200. The Earned Income Tax Credit (EITC) is a tax credit meant to help low - moderate income workers and families. It is calculated as a fixed percentage of earnings that depends on your income. This tax credit has multiple requirements that include:
- Proof of earned income
- Investment income below $3,650 in the same tax year
- Valid Social Security Number
- Be one of: married filing jointly, the head of household, a qualifying widow or widower, single
- Be a U.S. citizen or resident alien for the full year
The amount you receive may change if you have children or dependents, are disabled, or meet other criteria. For more information, visit the -IRS Earned Income Tax Credit (EITC) page.