6 factors that affect how much income tax you pay

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Which States Have No Income Tax?

We all know that the salary we negotiate is not the same as our take-home pay. Between benefits, retirement contributions and taxes, the difference can be quite substantial. In America, federal and often state and local governments collect income taxes. Understanding which factors affect how much income tax you have to pay can help you make more informed decisions.

Check out our federal income tax calculator.

1. Taxable Income

The federal tax system is progressive, meaning that generally your tax rate increases as your income increases. The amount of taxable income you have determines what your tax bill will be.

Marginal tax rates determine how taxable income is taxed and those who pay income taxes are divided up into different ranges known as tax brackets. Income in each bracket is then taxed at a specific rate.

2. Filing Status

Besides income, the taxes you pay depend on your filing status. So whether you file as single, married filing separately, married filing jointly or head of household will affect how much income tax you owe. For tax year 2015, single filers with taxable income of up to $9,225 and married couples filing jointly with taxable income of up to $18,450 are taxed at a rate of 10%.

Don't miss these important tax dates:

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6 factors that affect how much income tax you pay

January 15, 2016: Those who are self-employed or have fourth-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

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April 18, 2016: Individual tax returns are due for the 2015 tax year

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April 18, 2016: Requests for an extension on filling out your taxes must be filed by this date

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April 18, 2016: Those who are self-employed or have first-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

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April 18, 2016: This date is also the deadline to make a contribution to an IRA account for 2015

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June 15, 2016: Those who are self-employed or have second-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

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September 15, 2016: Those who are self-employed or have second-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

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October 17, 2016: 2015 tax returns that received an extension are due by this date

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October 17, 2016: Today is the last chance to recharacterize a traditional IRA that was converted to a Roth IRA during 2015

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January 15, 2017: Those who are self-employed or have fourth-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

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3. Adjustments

To determine your total amount of taxable income, you must first add up all of your earned income (from salaries, wages and tips) and unearned income (from sources like Social Security, other retirement accounts and dividend payments). Then, you subtract your adjustments to find your adjusted gross income (AGI). Adjustments to income include student loan interest payments, IRA contributions and moving expenses.

Try our property tax calculator.

4. Exemptions

After you've accounted for your adjustments, you'll arrive at your taxable income amount by subtracting your deductions and your exemptions. There are personal exemptions that you can claim for yourself and your spouse. And then there are dependency exemptions that you can claim for your dependents.

5. Tax Deductions

Deductions can get a bit more complicated. Many taxpayers claim the standard deduction, which depends on your age, your income and your filing status. You can also itemize your deductions by adding up all of your eligible expenses.

Some deductible expenses include mortgage interest, charitable contributions and medical expenses. Depending on what gives you the larger deduction, you'll need to either take the standard deduction or itemize your deductions.

Related Article: What Can You Deduct at Tax Time?

6. Tax Credits

Unlike adjustments, exemptions and deductions, tax credits apply to your final tax bill instead of your taxable income. Tax credits are only available to taxpayers in certain circumstances, like those who earn below a certain amount, individuals with childcare expenses and those who have adopted a child.

There are also tax credits associated with getting a post-secondary education, installing energy-efficient equipment at home and enrolling in a government health insurance plan. Some of these tax credits are even refundable, meaning that if your credit exceeds your liability you'll get the difference refunded to you.

The Takeaway

No one likes paying income taxes. But understanding the factors that impact how much you will pay can help you take steps to lower your tax bill.

RELATED: Ways to avoid a tax audit

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6 factors that affect how much income tax you pay

Double check your figures to assure there are no mistakes

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Be sure to be 100% honest, and report your numbers realistically

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Those in the highest and lowest income brackets are most often targets of fraud, and thus, audits

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Don't draw too much attention with unusual or unrealistic deductions

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Filing returns electronically drastically reduces errors

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