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What is taxable income tax?

What is  taxable income tax?

We don't pay taxes on all the income we make. We're only going to pay taxes on the portion that we whittle down to to find a taxable income. So that would be our total income. The amount we made last year minus any deductions. So we choose standard or itemized minus any exemptions and that's per person. That would be our taxable income. So another thing like I joke with exemptions the daggers if you're familiar with that huge family they have 19 kids. They're not all with them stuff but they had 19 kids. So 19 kids plus two adults would be 21 people in their house. They would have received 21 exemptions so that would mean every single person in their family was an exemption that they could reduce to taxable income down to.
Whenever we file our taxes we use the taxable income to determine how much we owe or should receive back. When filing our taxes to calculate how much you owe. So the amount you owe the U.S. government is called your tax liability and liability just means you're liable you're responsible for paying something or responsible for something. So if your income tax return form let's say you file your taxes using the return form and it determines that your tax liability is three thousand dollars but throughout the year your employer has withheld four thousand dollars. What happens. Well your tax liability is less than what your employer has withheld throughout the year and that's how people get refunds is that they whenever they file their taxes they realized they paid or they've had their employer take out too much of their paychecks and they don't pay as much in taxes as they thought. So they get a refund But what would happen if you only had two thousand dollars pay out throughout the year. This would mean that you if you owed three thousand and you've only set aside or you put employers money set aside two thousand but you owe three thousand. This would indicate that you now pay need to pay the government a thousand dollars because not enough had been withheld from your paycheck.


Lastly tax credits. Tax credits are the amount of money that is subtracted from the tax amount you owe. It's a direct dollar amount. So if you've heard of different types of tax credits there's tax credits for having children. There's tax credits for going green in your house. So this would be. 
Here's an example let's say you owed the IRS a thousand dollars to the government a thousand dollars.
But if you had a tax credit for a thousand dollars that would reduce your amount down to nothing. It's kind of like having a gift card to the government like it's going to bring down the total amount that you owe to nothing Or depending on how much you owe and how much your tax credit is for In this case it means you owe nothing.

Thank you.

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