taxes ballpark figure re question?

Question

Ok make 15,000 a year and earned 800 in intrest from bank cds for the year. Live in NY and have no children and single and no deductions. How much do I pay on taxes for the 800 dollors intrest. I just want to know the ballpark figure. Is it 15% flat for the 800 bucks?? Thanks in advance

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

The Internal revenue service can give you the best answer, and you can check with a public accountant or someone that keeps up to date on filing income taxes. The IRS changes regulations so much that an average person normally cannot give you much of a ballpark figure without knowing your complete deductions etc.