Calculating state taxes and take home pay

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 are 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 at the state I'm in, there is a standard deduction. It's $3,769 for a single filer, for a single person. And instead of having a personal exemption which reduces your taxable income, which is we saw at the federal level. They have a tax credit, a personal tax credit which 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 3,769 ... $3,769 gets me to taxable income in my state of $46,231 or $46,231. Now if you look at these brackets, it looks like we are falling into this 8% bracket right over here, but just as we've said in this ... in the federal example, that does not mean we pay 8% on all 46,000 ... $46,231. It means we only pay the 8% on the increment above $37,005. For the rest of the brackets, we pay 1% on the first 7,000 or for $7,124, 2% on the increment up to 16,980. So on and so forth. So let's calculate what that is. So we're going to pay ... We're going to pay 1% ... 1% on the first $7,124. Then to that, we're going to pay 2%. We're going to pay 2% on the increment up to $16,980 and that increment is $16,980 - $7,124 and then we are going to pay 4% ... We're going to pay 4% on the increment up to $26,657 and so that's that number minus 16,890 and then we're going to pay 6% ... We're going to pay 6% on the increment up to $37,005. So it's 37,005 - 26,657 and then, we're in the home stretch here, we're going to pay ... We're going to pay 8% on the increment ... on the increment above $37,005. So our taxable income, we already saw is 46,231. So it's 46,231 - 37,005. 37,005 bring us to ... Did I type all that in right? Let's see, 7 x 1% and then we have 2% x, yep that looks right and then we have 4%. I want to make sure I'm typing all this in correctly. And then 37,000 - 26,657 and then that's 6% and then 8% on that last increment. Drum roll, please. We get to $2,018 just based on the brackets right over here. So 2,000 ... So at the ... at the state level ... At the state level, it looks like we have $2,018 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 going to pay $2,018, but we get a credit of $102, which gets us to what? That gets us to 1,916 ... $1,916 in state taxes. So our total taxes, $9,754 at the federal level. $1,916 at the state level and so our actual take home pay is going to be ... Let's see, $50,000 is what we're starting with. We're going to pay ... We're going to pay at the federal level. I actually already figured out in the last video what we're left with, but at the federal level we're going to start off ... We're going to pay $9,754. Then at the state level, we're going to pay $1,916 getting us to $38,330 take home pay. $38,330 ... 330, 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, $50,000, we are left with 76.6% or another way of thinking about it is, roughly 23.4 or 23⅓ % of your income gets taken for taxes. That is your effective tax rate. So effective tax rate ... Let me write this. Effective ... Effective tax rate and then we're including both federal ... federal + state ... federal + state, just look at the number again. You're keeping 76.6, so you are paying 23.4 ... 23., actually, it looks like 23.34. So approximately 23, approximately 23%. If you want to think on a monthly basis, at $50,000 you thought ... So $50,000, you thought that you would be taking home $4,166 a month, but now you're actually going to be taking home $3,000 ... 38,330 / 12. You're only going to bring home about $3,000, a little bit under $3,200 a month. So you have to plan accordingly.