- Tax Planning
- Introduction
- Understand What Our Leaders Have Said Regarding Taxes
- Understand How Tax Planning Can Help You Attain Your Personal Goals
- Understand the Tax Process and Tax Strategies to Help You Lower Your Taxes
- Step 1: Calculate gross income from all sources minus losses, exclusions, and deferrals
- Step 2: Subtract adjustments to get your adjusted gross income
- Step 3: Subtract itemized or standard deductions (whichever is greater)
- Step 4: Subtract exemptions to get taxable income
- Step 5: Refer to the tax table and calculate your tentative tax
- Step 6: Subtract credits to calculate total tax owed
- Step 7: Subtract taxes paid to get total taxes owed/amount of refund
- Understand How to Minimize Tax Payments for a Given Level of Income
- Understand How To Be More Efficient With Your Taxes
- Understand the Major Tax Features of the US Tax System
- Summary
- Assignments
- Investments 1: Before you Invest
- Investments 2: Your Investment Plan
- Investments 3: Securities Market Basics
- Investments 4: Bond Basics
- Investments 5: Stock Basics
- Investments 6: Mutual Fund Basics
- Investments 7: Building Your Portfolio
- Investments 8: Picking Financial Assets
- Investments 9: Portfolio Rebalancing and Reporting
- Retirement 1: Basics
- Retirement 2: Social Security
- Retirement 3: Employer Qualified Plans
- Retirement 4: Individual and Small Business Plans
- Estate Planning Basics
Step 5: Refer to the tax table and calculate your tentative tax
Once you have determined your taxable income, determine your filing status. Your filing status is based on your marital and family situation. Filing status is a factor in determining your standard deduction and your correct amount of tax. Your marital status on the last day of the year determines your status for the entire year. The five filing status options are:
1. Single. Generally, if you are unmarried, divorced or legally separated, your filing status is Single.
2. Married Filing Jointly. If you are married, you and your spouse may file a joint return.
3. Married Filing Separately. Married taxpayers may elect to file separate returns.
4. Head of Household. If you are unmarried and paid more than half the cost of maintaining a home for you and a qualifying person, you may file as head of household.
5. Qualifying Widow(er) with Dependent Child. If your spouse died during the last two years, you have a qualifying child and meet certain other conditions; you may file as a qualifying widow(er) with dependent child.
Once you have determined your filing status, check the IRS tax tables for the current year. Find the table and the line that represents your taxable income for the year. Cross-reference this amount with your filing status to determine your tax amount. The following are examples of tax tables for the filing status of Married Filing Jointly [Schedule Y-1] from the IRS:
| Year | If Taxable Income is over | But not over | Tax is | Plus this percentage | of the excess |
| 2006 | 0 | $15,100 | 0 | 10% | 0 |
| $15,100 | $61,300 | $1,510 | 15% | $15,100 | |
| $61,300 | $123,700 | $8,440 | 25% | $61,300 | |
| $123,700 | $188,450 | $24,040 | 28% | $123,700 | |
| 2007 | 0 | $15,650 | 0 | 10% | 0 |
| $15,650 | $63,700 | $1,565 | 15% | $15,650 | |
| $63,700 | $128,500 | $8,772 | 25% | $67,300 | |
| $128,500 | $195,850 | $24,972 | 28% | $128,500 | |
| 2008 | 0 | $16,050 | 0 | 10% | 0 |
| $16,050 | $65,100 | $1,605 | 15% | $16,050 | |
| $65,100 | $131,450 | $8,963 | 25% | $65,100 | |
| $131,450 | $200,300 | $25,550 | 28% | $131,450 | |
| 2009 | 0 | $16,700 | 0 | 10% | 0 |
| $16,700 | $67,900 | $1,670 | 15% | $16,700 | |
| $67,900 | $137,050 | $9,350 | 25% | $67,900 | |
| $137,050 | $208,850 | $26,638 | 28% | $137,050 | |
| 2010 | 0 | $16,750 | 0 | 10% | 0 |
| $16,750 | $68,000 | $1,675 | 15% | $16,750 | |
| $68,000 | $137,300 | $9,363 | 28% | $68,000 | |
| $137,300 | $209,250 | $26,688 | 28% | $137,300 |
The government has also set up a system to ensure that all income-earners pay some tax. There is an alternative minimum tax (AMT) that is aimed at preventing the wealthy from avoiding income taxes. For most people, this minimum tax has no effect; however it may be significant for the wealthy. Note that this tax is becoming increasingly prevalent.
