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Now that tax season is over (except for those who filed for an extension), it's natural to wonder exactly where the hard-earned dollars you paid in tax over the past year actually went.
To answer that question, the White House put together a website that gives details on the government's expenditures. Dubbed the Federal Taxpayer Receipt, you can enter in your income, Social Security, and Medicare taxes and get a personalized look at where your tax dollars got spent. Understanding that Social Security and Medicare taxes go toward funding those respective programs, here are the 10 areas where the greatest percentage of income tax revenues gets spent.
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The 10 Biggest Things Your Income Taxes Pay For
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The 10 Biggest Things Your Income Taxes Pay For
Nearly 25 percent of all income taxes go to pay for defense. Of that amount, salaries and benefits for members of the armed services make up roughly a quarter, while most of the remainder goes toward equipment and supplies as well as weapons, construction, and research and development.
About 22.5 percent of income tax revenue goes toward health care programs. The two big expenditures are for Medicare and Medicaid, but additional amounts go toward health research, food safety, and public health services and disease control. These amounts don't include the dedicated Medicare taxes that workers have withheld from their pay.
The government spends roughly 17 percent of income tax revenue on various programs that provide money for those in need, including retirement benefits for federal employees, food and nutritional assistance, and Supplemental Security Income. The Earned Income Tax Credit and the Child Tax Credit are also funded from income tax revenue.
The national debt incurs a substantial amount of interest each year. Even at current low interest rates, about 8 percent of your income tax dollars go toward paying interest costs annually.
About 4.5 percent of spending goes to pay for various benefits for veterans. Income and housing support represent not quite half of the spending in this category, with health-care expenditures nearly as high. The remainder goes for education, training, and other benefits for former military personnel.
The majority of the 3.3 percent of income tax revenue spent on education and job training goes toward funding education through the high-school level. College financial aid, along with employment training for those with disabilities and more general job training and employment services for the broader public, take up the remainder.
Just over 2 percent of income tax revenue goes to support the nation's immigration and law enforcement programs. These expenses help fund the nation's court system, as well as federal law enforcement agencies and the federal service that implements U.S. immigration policy.
About 2 percent of revenue from income taxes is spent on various expenses related to the natural resources of the nation. About a third of that money goes toward water and land management, with the remainder funding environmental protection initiatives as well as management of the nation's energy assets and conservation efforts.
Money going toward international initiatives makes up about 1.7 percent of total income tax revenue. About half of that amount is spent on humanitarian and economic-development assistance, while the remainder is split among the costs of maintaining embassies and diplomatic missions, and providing security assistance overseas.
Just over 1 percent of income taxes go toward science-related programs. More than half of that amount goes to NASA, but additional recipients include the National Science Foundation as well as various national laboratories and other research facilities.
So, you decided to become your own boss (at least part-time) and start driving for a ride-sharing company like Lyft. Use the Lyft tax preparation checklist below to organize your income and deductions to make filing your taxes a breeze. Remember, not all items listed will apply to you, but it will give you a good idea on what you need to report as income and what you can claim as a deduction.
Originally created to make sure the wealthy paid taxes even after using tax breaks and loopholes, the Alternative Minimum Tax (AMT) has never been updated and continues to impact middle class Americans more and more each year as a result of inflation. To compensate for inflation, the AMT now includes an exemption amount. This exemption is indexed for inflation so it changes every year.
Taxpayers who upgrade their homes to make use of renewable energy may be eligible for a tax credit to offset some of the costs. As of the 2018 tax year, the federal government offers the Nonbusiness Energy Property Credit. The credits are good through 2019 and then are reduced each year through the end of 2021. Claim the credits by filing Form 5695 with your tax return.
Every April, many taxpayers wait until the last minute to file their federal income tax returns. Despite this tendency, there are many reasons to file your taxes early. If you will receive a refund, you may want to submit your return as quickly as possible. Additionally, there are benefits to filing early for those taxpayers who have a balance due.
