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Calculating state taxes and take home pay | Taxes | Finance & Capital Markets | Khan Academy - YouTube
Channel: Khan Academy
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Now let's figure out how
much the single person
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making $50,000 a year would
pay in state income taxes,
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assuming that they're in a
state that has income taxes.
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And this right here are the
current tax brackets for my state
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and every state will have
different income tax brackets and
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they're likely to change year
after year, but the important
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thing to take away is just
how all of this is calculated.
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So at the state level, you
still get ... you still,
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or at least at the state I'm in,
there is a standard deduction.
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It's $3,769 for a single
filer, for a single person.
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And instead of having a personal exemption
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which reduces your taxable income,
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which is we saw at the federal level.
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They have a tax credit,
a personal tax credit
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which essentially just
a credit on your taxes.
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So this doesn't reduce
your taxable income.
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This can actually be used against
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the actual taxes that you owe.
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So first, let's think about what our
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taxable income is in my state.
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So I'm starting with $50,000.
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$50,000 is my gross income
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and then I have a standard
deduction in my state.
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A standard deduction in my
state of 3,769 ... $3,769
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gets me to taxable income in
my state of $46,231 or $46,231.
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Now if you look at these brackets,
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it looks like we are falling into
this 8% bracket right over here,
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but just as we've said in this
... in the federal example,
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that does not mean we pay 8%
on all 46,000 ... $46,231.
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It means we only pay
the 8% on the increment
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above $37,005. For the rest
of the brackets, we pay
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1% on the first 7,000 or for
$7,124, 2% on the increment
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up to 16,980. So on and so forth.
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So let's calculate what that is.
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So we're going to pay ...
We're going to pay 1% ... 1%
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on the first $7,124. Then to
that, we're going to pay 2%.
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We're going to pay 2% on
the increment up to $16,980
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and that increment is
$16,980 - $7,124 and then
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we are going to pay 4%
... We're going to pay 4%
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on the increment up to
$26,657 and so that's
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that number minus 16,890
and then we're going to pay
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6% ... We're going to pay 6%
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on the increment up to $37,005.
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So it's 37,005 - 26,657
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and then, we're in the home stretch here,
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we're going to pay ...
We're going to pay 8% on the
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increment ... on the
increment above $37,005.
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So our taxable income,
we already saw is 46,231.
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So it's 46,231 - 37,005.
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37,005 bring us to ... Did
I type all that in right?
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Let's see, 7 x 1% and then we have 2% x,
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yep that looks right and then we have 4%.
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I want to make sure I'm
typing all this in correctly.
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And then 37,000 - 26,657
and then that's 6% and then
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8% on that last increment.
Drum roll, please.
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We get to $2,018 just based on
the brackets right over here.
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So 2,000 ... So at the ... at the
state level ... At the state level,
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it looks like we have $2,018
just based on our taxable
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income, but now we have to
factor in this tax credit
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and a tax credit as opposed
to a deduction, remember,
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a deduction or an exemption
takes ... It reduces your taxable
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income. A credit goes
directly against your taxes.
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So we were going to pay
$2,018, but we get a credit
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of $102, which gets us to what?
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That gets us to 1,916 ...
$1,916 in state taxes.
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So our total taxes, $9,754
at the federal level.
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$1,916 at the state level and
so our actual take home pay
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is going to be ... Let's
see, $50,000 is what we're
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starting with. We're going
to pay ... We're going to pay
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at the federal level.
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I actually already figured
out in the last video
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what we're left with, but at
the federal level we're going to
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start off ... We're going to pay $9,754.
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Then at the state level, we're
going to pay $1,916 getting us
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to $38,330 take home pay.
$38,330 ... 330, is what I'm
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actually ... I'm actually
going to be able to spend.
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And so based on this, we can
figure out what an effective
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tax rate is, based on both the
federal and state income tax.
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So we are ... If we look at that
as a fraction of our original
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income, $50,000, we are left
with 76.6% or another way of
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thinking about it is, roughly
23.4 or 23⅓ % of your income
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gets taken for taxes. That
is your effective tax rate.
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So effective tax rate
... Let me write this.
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Effective ... Effective tax rate
and then we're including both
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federal ... federal +
state ... federal + state,
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just look at the number again.
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You're keeping 76.6, so you are
paying 23.4 ... 23., actually,
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it looks like 23.34. So
approximately 23, approximately 23%.
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If you want to think on a monthly basis,
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at $50,000 you thought ...
So $50,000, you thought
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that you would be taking
home $4,166 a month,
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but now you're actually going
to be taking home $3,000 ...
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38,330 / 12. You're only going
to bring home about $3,000,
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a little bit under $3,200 a month.
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So you have to plan accordingly.
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