Taxes ballpark figure?

Question

If you make 15,000 a year but also earn 800 dollors in intrest that year on bank cds. How much taxes do you have to pay around for the 800 intrest in cds? Just a ballpark figure? Is it 15 percent off the 800 dollors. Thanks.

Answer 1

For federal tax purposes, what you do is add you earned income to your interest income, and subtract your standard deduction and personal exemption. The remainder is taxed. Earned income (from your W-2) and interest are both taxed at the same rate. The rate structure is tiered, meaning the first so much is taxed at one rate and the next so much is taxed at a higher rate and so on.

So, using your example, here is what I figure:

$15,000 earnings
+ $800 interest
----------
$15,800 gross income
-$5,150 standard deduction for single people
-$3,300 personal exemption for one person (yourself)
----------
$7,350 taxable income

Since the first $7,550 is taxed at 10%, all of your taxable income will be taxed at 10%. Your federal tax will be $735.

If you had another $500 of income, regardless if it were interest or earned income, $200 of it would be taxed at 10% and $300 would be taxed at 15%.

This is for federal tax purposes only. Check with your state and possibly city for other taxes. This also assumes you have no credits or other adjustments.

Want to pay less tax? Put money into your retirement. Every $100 you put into a 401k or IRA lowers your income by $100 which lowers your tax $10.

In addition, you should qualify for a "Retirement Saver Credit" (assuming you didn't take any money out of a retirement plan since 2002). For single people who have between $15,000 and $16,250 of income, your credit is 20% of your retirement contribution. The same $100 contribution to your retirement that saved you $10 in tax also gives you $20 in credit for a total tax savings of $30.

For single people with incomes of $15,000 or less, the 20% credit becomes 50%. So, if you put $800 into retirement, your income drops to the magic $15,000 level, your tax drops by $80 (10% of $800), and your credit is now $400 (50% of $800). Your $735 tax bill is now only $255. That is a savings of $480 by contributing $800 to your own retirement. Not bad, huh?

Answer 2

If you are single and take the standard deductions, about 13% federal taxes. You will also have state and local taxes to deal with. If you were to transfer that money from cds to t-bills, you would not have to pay the state and local portion of the taxes. The rates on t-bills are currently at about 5%.

Answer 3

Are you single, married or Head of household? What state do you live in? Can you be claimed as a dependant on someone elses return?

BTW 15% of $800 is 120.