The Top 10 Things for 18-25 Year-olds to Know About Taxes
9) Renter’s Credit
This one depends on the state where you live. You can’t claim this one on your federal return (this only applies to your state taxes), but, if you live in a participating state, it’s worth looking into.
10) Take Home Pay
Here’s a hypothetical—you take a job that promises $50,000 a year. On a bi-weekly pay schedule, your check should be about $1900. Yeah right. If we didn’t have taxes and other withholdings, it would be. But, depending on how much you elect to take out for federal, the check could be as low as $1400-1500. So be prepared (yes, I’m implying that you shouldn’t go out and buy that Bentley right away—at least wait a while). Here’s a very brief breakdown of what’s being withheld from your checks:
Federal—Amount is based on the information you provided on your W-4 Form.
State—Varies from state to state, but is usually a certain percentage of your Federal withholding. To view the withholding form for your state, go here:
Medicare—A straight 1.45% of your gross pay.
Social Security—This is 6.2% of your wages, unless you make over $106, 800. If you make that much, you don’t pay any Social Security taxes.
For help budgeting that money that you’re actually able to take home after all of this stuff is taken out, you should check out some of the stuff Quicken Online offers (another shameless plug, but it’s definitely worth the mouse click—and it’s free to boot!):
There it is. See, painless. And hopefully a little enlightening. When you go to fill out your returns, you should have a little more ammo to use. Here’s hoping your returns flow like wine and you’re finally able to buy that 1080p HD flat screen.