Insights

Personal Tax

Let’s talk Personal Tax. It is always important to be knowledgeable and aware of various Tax Laws, procedures and compliances as a fresh graduate, at the very start of your career, or on your way to file your taxes for the very first time in your life.

It is the taxes that you pay which is a fundamental civic duty and responsibility that funds and supports various government agencies, functions and services that are provided to you.

There are many governing bodies that require you to pay taxes at different levels. The Federal and The State being the most important ones. I will be addressing all things related to Federal Tax and compliance at first.

What Are You Taxed On?

What are you required to pay taxes on? Almost everything. Some examples being wages, salaries, interests, dividends and other sources of income. To elaborate, the US Tax system will encompass, not limited or restricted to, the following:

• Income Tax

• Payroll Tax

• Capital Gains Tax

• Sales Tax

• Property Tax

• Estate Tax

Let’s talk Income Tax 

This is tax imposed on individuals and businesses that is based on their earnings. The tariff or percentage of tax that an individual or business has to pay that depends on their tax filing status and taxable income.

Filing Status

Your tax filing status is what is used to determine your standard deductions, your eligibility for credits, to pay the correct amount of tax and to qualify for refunds if any.

There are Five tax filing statuses in US:

• Single

• Married but filing jointly

• Head of household

• Qualifying & surviving spouses

• Married but filing separately

Tax Brackets

What is a Tax Bracket?

It is basically a part of the Tax System in which the level of taxes an individual pays increases as the individual’s income grows. Higher the income, higher the rate.

This is known as a “Progressive” tax system.

There are currently Seven federal tax brackets in the US with rates ranging from 10% to 37%. The IRS always adjusts tax brackets according to inflation.

Check out the following link to get a better understanding of what Tax Bracket you would likely fall under and the rate at which your income would be taxed.

Tax Bracket For Income Earned In 2024

https://www.irs.gov/filing/federal-income-tax-rates-and-brackets

Tax Bracket For Income Earned In 2025

For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly). The other rates are:

• 35% for incomes over $250,525 ($501,050 for married couples filing jointly).

• 32% for incomes over $197,300 ($394,600 for married couples filing jointly).

• 24% for incomes over $103,350 ($206,700 for married couples filing jointly).

• 22% for incomes over $48,475 ($96,950 for married couples filing jointly).

• 12% for incomes over $11,925 ($23,850 for married couples filing jointly).

• 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).

Tax Year

What is a “Tax Year” and why is it important to know this term?

A "Tax Year" is an annual accounting period for keeping records and reporting income and expenses. In the US, the Tax Year for individuals runs from Jan. 1 to Dec. 31 and includes taxes owed on earnings during that period which will be filed in the subsequent year.

I can cite this with a simple example. Rates for Tax Year 2025 simply applies to taxes that you would file in 2026 for income earned in 2025 like how you would file in 2025 for Tax Year 2024.

Let’s talk about Tax Deadlines:

Tax Season: Tax season begins when the IRS starts to process Tax Returns. Eg: The filing season for Tax Year 2024 will begin on January 27, 2025.

Due Date: Federal Taxes for Tax Year 2024 are due on April 15, 2025.

Extension: If you are unable to file by April 15, 2025, you can always file for an extension. After you have filed an extension, you have until October 15, 2025 to file your taxes.

Be Tax Informed

These are the very basic ground rules of Personal Taxes that one should know about to not only help you file your taxes for Tax Year 2024 in 2025 but also help you plan for Tax Year 2025 to file in 2026.

A lot of planning and structuring will help you save a lot and we are here to help you just for that.