Where is my money going?

Taxes are a way for governments to collect money from individuals and businesses to fund public services and programs. The tax system varies from country to country, but in general, taxes are collected by government agencies and used to pay for things like infrastructure, education, healthcare, social welfare programs, defense, and other public goods. Ideally, the hard earned money you're paying on taxes goes towards something that will benefit everyone as a whole...ideally.

When you pay taxes, the money is usually used to fund a variety of government programs and services. This includes things like road construction, public schools, healthcare, and emergency services like police and fire departments. Taxes are also used to fund programs like social security, unemployment insurance, and other safety nets that provide financial assistance to people who need it.

Tax Brackets?  

Tax brackets refer to the different levels of income that are subject to different tax rates. For example, in the United States, there are seven different tax brackets, ranging from 10% to 37%. As your income increases, you move up into higher tax brackets and pay a higher percentage of your income in taxes. To see what tax bracket you fall in, check out the 2023 Tax Bracket. Make sure you note how you're filing (single, married filing jointly, married filing separate, or head of household) and each respective income range.

How Much I Owe?

 It's important to note that only the income that falls within a particular tax bracket is taxed at that rate. For example, if you're in the 22% tax bracket, you only pay 22% on the income that falls within that bracket. The income that falls in the lower tax brackets is taxed at the lower rates. For example,  If you had $95,000 of taxable income and are a single filer. You WILL NOT pay 22% on all $95,000 taxable income.  You’d pay 10% on that first $11,000, which is $1,100. Then 12% on the chunk of income between $11,001 and $44,725, which in this example is $4,047. And then you’d pay 22% on the rest because some of your $95,00 of taxable income falls into the 22% tax bracket. Here's a little table to help explain this example.

 

The total tax bill would be about $16,207 ($1,100 + $4,047 + $11,060) - about 17% of your taxable income, even though you're in the 22% bracket. That 17% is your effective tax rate. 

Overall, taxes can be complex and there are many different factors that can affect how much you owe. Working with a tax professional can help you understand your tax obligations and ensure that you're paying the right amount.