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Calculating state taxes and take home pay

Video transcript

now let's figure out how much the single person making $50,000 a year would pay in state income taxes assuming that they're in a state that has income taxes and this right here the current tax brackets for my state and every state will have different income tax brackets and they're likely to change year after year but the important thing to take away is just how all of this is calculated so at the state level you still get you still or at least the state I'm in there is a standard deduction it's three thousand seven hundred and sixty nine dollars for a single filer for a single person and instead of having a personal exemption which reduces your taxable income which is what we saw at the federal level they have a tax credit a personal tax credit which is essentially just a credit on your taxes so this doesn't reduce your taxable income this can actually be used against the actual taxes that you owe so first let's think about what our taxable income is in my state so I'm starting with $50,000 $50,000 is my gross income and then I have a standard deduction in my state a standard deduction in my state of three thousand seven hundred and sixty nine three thousand seven hundred and sixty nine dollars gets me two taxable income in my state of forty six thousand dollars two hundred and thirty one or forty six thousand two hundred and thirty one dollars now if you look at these brackets it looks like we are falling into this eight percent bracket right over here but just as we said in this in the federal example that does not mean we pay eight percent on all 46 thousand forty six thousand two hundred and thirty one dollars it means we only pay the eight percent on the increment above 37 thousand and five dollars therefore the rest of the brackets we pay one percent on the first seven thousand words first seven thousand one hundred twenty four 2% on the increment up to 16 thousand nine hundred eighty so on and so forth so let's calculate what that is so we are going to pay we are going to pay one percent one percent on the first seven thousand one hundred and twenty four dollars then to that we're gonna pay two percent we're gonna pay 2% on the increment up to sixteen thousand nine hundred and eighty dollars and that increment is sixteen nine eighty minus seven thousand one hundred and twenty four dollars and then we are going to a 4% we're going to pay 4% on the increment up to twenty six thousand six hundred and fifty seven dollars and so that's that number minus sixteen thousand eight hundred and ninety and then we are going to pay six percent we are going to pay six percent on the increment up to thirty seven thousand and five dollars just thirty seven thousand five minus twenty six six five seven and then we're in the homestretch here we're gonna pay we're gonna pay eight percent on the increment on the increment above thirty seven thousand and five dollars so our taxable income we already saw is forty six thousand to thirty one so it's forty six thousand to thirty one minus thirty seven thousand five thirty seven thousand five brings us to did I type all of that in right let's see seven times one percent and then we have two percent times that looks right then we have four percent I want to make sure I'm typing all this in correctly and then thirty seven thousand minus twenty six six 57 and then at six percent and then eight percent on that last increment drum roll please we get to 2018 dollars just based on the brackets right over here so two thousand so at the at the state level at the state level it looks like we have two thousand and eighteen dollars just based on our taxable income but now we have to factor in this tax credit and a tax credit as opposed to a deduction remember a deduction or an exemption takes it reduces your taxable income a credit goes directly against your taxes so we were gonna pay 2018 but we get it we get a credit of 102 dollars which gets us to what that gets us to 1916 1916 dollars in state taxes so our total taxes 9750 for the federal level 1916 at the state level and so our actual take-home pay is going to be you see fifty thousand is what we're starting with we're gonna pay we're gonna pay at the federal level actually ready figured out in the last video what we're left with but at the federal level going to start up we're gonna pay nine thousand seven hundred and fifty four then at the state level we're gonna pay 1916 getting us to thirty eight thousand three thirty take-home pay thirty eight thousand three thirty three thirty is what I'm actually I'm actually going to be able to spend and so based on this we can figure out what an effective tax rate is based on both the federal and state income tax so we are if we look at that as a fraction of our original income fifty thousand we are left with seventy six point six percent or another way of thinking about it is roughly twenty three point four or twenty three and a third percent of your income gets taken for taxes that is your effective tax rate so effective tax rate we write this effective effective tax rate and then we are including both federal federal plus state federal plus state just look at the number again you're keeping seventy six point six so you are paying twenty three point four twenty three point actually looks like twenty three point three four so approximately twenty three approximately twenty three percent if you want think out on a monthly basis at fifty thousand dollars you thought so fifty thousand dollars you thought that you would be taking home 4166 a month but now you're actually going to be taking home three thousand thirty eight thousand three hundred and thirty divided by twelve you're only going to bring home about three thousand a little bit under thirty two hundred a month so you have to plan accordingly