Around the middle of the year it is a good idea to ensure that by the end of the year you will have withheld your tax liability due. No more, no less. It’s common to adjust your withholding’s during the year to reflect life events or just to put more money in your pocket at that time. Time and time again it’s also common that you forget to adjust the withholding’s back to cover your tax liabilities. Knowing what your tax due will be is half the battle, but equal parts importance to earning your wage and paying your bills. It should be part of your monthly budgeting.
There’s more to it obviously, but the Individual income tax formula is as follows and can be used to estimate your taxable income to give you an idea what your up against and give you time to gather your options to lower your taxable income in an effort to conserve AFTER TAX WEALTH.
Individual Income Tax Formula:
Income (broadly conceived) Add income together if you file married filing joint. Don’t forget distributions from 401k’s, retirement or taxable social security, investment income, and net self-employment income or loss.
Less: Exclusions Ill go into the list of exclusions later
= Gross Income
= Adjusted Gross Income
Less: [Itemized or standard deduction] and [exemptions] for every person on the tax form
= Taxable Income
To find the estimated tax for your bracket add
the tax + [the % over the amount]= Tax