Where do your tax dollars actually go?


For most Americans, spending $10,000 remains a big deal. That's the kind of money we spend on cars, down payments for homes, once-in-a-lifetime vacations, or parties marking major life events.

Not many of us can shell out $10,000 so casually that, if asked about where it went, they wouldn't even know. However, the average American family pays the federal government at least that amount in taxes each year, and many of us only have a vague sense of where the money goes.

Yes, we know taxes pay for everything from roads to defense, social programs to public television. But the specific breakdown of tax spending is something most Americans give little thought to -- even though taxes are the biggest single line item for many Americans each year.

12 PHOTOS
11 ways to reduce next year's tax bill
See Gallery
11 ways to reduce next year's tax bill

1. Contribute to a 401K or IRA

Contributing to a retirement fund is an important way to ensure financial independence in your golden years, but it can also convey short-term tax benefits. In most cases, the contributions you make to your 401K and IRA plans are tax-deductible and are not included in your taxable income at the end of the year. (Note: If you didn’t contribute to an IRA in 2016, you still have time. You have until April 18 to contribute up to the maximum amount and shave off a good chunk of your tax bill. Filed your taxes already? That’s OK. You can file an amended return to reflect the contribution.)

2. Buy a Home

There’s a distinct tax benefit to home ownership. The interest you pay on your mortgage is tax-deductible, and the interest is front-loaded. For the first several years, most of your mortgage payment goes toward interest, which will drastically reduce your adjusted gross income at tax time. Want an extra boost for your taxes next year? Consider paying January 2018’s mortgage payment in December to get a tax benefit before the end of the year.

3. Donate to Charity or Volunteer

You probably know charitable donations can be itemized and deducted from your income, so you’ll want to save receipts anytime you donate cash or items to charity. You can even deduct miles you travel for volunteering or other charity work.

“Miles you travel on behalf of a charity are deductible at 14 cents per mile for 2017,” said Gail Rosen, CPA.

4. Start a Home Business

Starting a home business can provide you with a new source of income and allow you to take deductions off any income the business generates.

These deductions include business costs you incur throughout the year, a portion of your mortgage and utilities if you use a home office and the cost of goods needed to keep your business running. You can even deduct startup costs.

“Any expenses that are incurred before the first sale are ‘start-up costs,’” Rosen said. “These costs cannot be deducted until the first sale. Then they are deducted over 15 years and you can deduct the first $5,000 in the first year.”

5. Search for a New Job

If you hunt for a new job in your field this year, you can write off some qualifying expenses as you search. There are exceptions, but potential write-offs include things like clothes or travel.

“If you looked for a new job in 2017, you should be aware of the income tax deduction that may be available with respect to job-search costs,” Rosen said. “Qualifying expenses are deductible even if they do not result in a new job being offered or accepted.”

6. Open a Flexible Spending Plan

Many employers offer flexible spending plans that let you contribute toward yearly medical expenses pre-tax. These contributions typically don’t count toward your taxable income.

7. Deduct Medical or Dental Expenses

Many medical and dental expenses are tax-deductible. According to Rosen, the cost of getting to and from medical treatment is deductible at 17 cents per mile, plus the cost of tolls and parking, and dependent expenses are also deductible.

“If you cover the medical cost of dependents, these can be deducted. Additionally, if you are covering the costs of an individual who would qualify as your dependent except that they have too much gross income — for example, an elderly parent — you may be able to deduct these costs as well,” said Rosen.

8. Education-Related Expenses

Current and former students have many eligible deductions and credits related to their education expenses. Paid student loan interest and tuition and fees can be claimed as deductions. Eligible current students can also access the American Opportunity Credit, which can cover up to $2,500 annually for four years, and the Lifetime Learning Credit, which can cover up to $2,000 per tax return.

9. Install Solar Energy

Homeowners who install solar energy systems in their home can get back tax credits at up to 30% of the cost of installation. This credit will begin to decrease after 2019 so you may want to act soon if you’re planning on installing solar panels.

As an added bonus, solar energy can significantly reduce your energy bills.

10. Hunt Down Every Available Tax Credit

We’ve named several tax credits above, but there are more, including credits for adopting children, the cost of child care and low-income households. Tax credits are more valuable than deductions, as they reduce your taxable income on a dollar-for-dollar basis, so make sure you’re taking advantage of every option.

11. Get a Pro to Do Your Taxes

No matter how much research you do, a professional may be able to identify tax deductions and credits that hadn’t occurred to you. Paying a reputable professional you trust can help you stay organized and minimize your tax liability. Here’s a handy guide to finding the right tax professional for your needs.

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

How much do we actually pay?

Before breaking down where the federal government spends our money, it's worth considering how the amount of taxes the average American pays has been calculated. In a recent article, my Motley Fool colleague Brian Feroldi broke the numbers down using data from the Internal Revenue Service (IRS).

Americans filed more than 150.6 million tax returns in 2015. During that year they also earned $10.17 trillion in adjusted gross income and had a total tax liability of $1.45 trillion. Some quick division means that the average gross income per return was $67,564 while the average federal tax hit was $9,655.

He also noted that many lower-income Americans either pay no taxes or even get money back because of the Earned Income Tax Credit. Take those returns out of the picture, he wrote, and "you are left with 99 million Americans who recorded an average federal tax hit of $14,654."

52 PHOTOS
How much Americans pay in taxes in every state
See Gallery
How much Americans pay in taxes in every state

Alabama: $10,531.97

  • Income Taxes Paid: $7,025.03
  • Sales Taxes Paid: $2,762.47
  • Property Taxes Paid: $473.98
  • Gas Taxes Paid: $270.99

Alabama residents pay less in property taxes than residents in any other state due to low median home values and the second-lowest property tax rate. Alabama residents have 23.66 percent of income going toward taxes, with a median household income of $44,509.

Beware health insurance in the state, though. A GOBankingRates study ranked Alabama among the worst states for health insurance costs.

Alaska: $16,259.83

  • Income Taxes Paid: $12,929.25
  • Sales Taxes Paid: $539.62
  • Property Taxes Paid: $2,589.90
  • Gas Taxes Paid: $201.06

Although the average income tax paid by Alaska residents is higher than the national average, it's largely due to the state's high median income of $75,112. Residents also only pay federal income taxes — there is no state income tax. Residents of this oil-producing state pay the least in gas taxes in the nation, at 31 cents per gallon. That helps make Alaska one of the least expensive states to own a car.

Arizona: $12,844.14

  • Income Taxes Paid: $8,623.95
  • Sales Taxes Paid: $2,529.45
  • Property Taxes Paid: $1,445.40
  • Gas Taxes Paid: $245.34

Arizona falls in the bottom half of states for total taxes paid by its residents, who see 24.58 percent of their income, on average, go toward taxes. Property taxes and gas taxes paid in this state are lower than the national average.

However, the 8.25 percent sales tax is noticeably higher than the national average of 6.47 percent. Meanwhile, the state was ranked among the worst states to start a business by a GOBankingRates study.

Arkansas: $10,662.08

  • Income Taxes Paid: $6,858.46
  • Sales Taxes Paid: $2,851.38
  • Property Taxes Paid: $688.53
  • Gas Taxes Paid: $263.71

Arkansas has one of the highest sales tax rates in the nation, at 9.3 percent. However, residents pay less in income taxes and gas taxes than the national average. Plus, the average property tax bill in Arkansas is among the lowest in the nation due to low median home values and a low tax rate.

California: $19,725.41

  • Income Taxes Paid: $13,313.68
  • Sales Taxes Paid: $2,529.45
  • Property Taxes Paid: $3,511.44
  • Gas Taxes Paid: $370.84

California residents pay more in taxes than residents of most other states. In fact, 31 percent of their income, on average, goes toward taxes. Considering that the cost of living in California also is high, it's no wonder it's one of the states where residents are most likely to live paycheck to paycheck, according to one GOBankingRates study.

Colorado: $18,114.42

  • Income Taxes Paid: $13,777.25
  • Sales Taxes Paid: $2,299.50
  • Property Taxes Paid: $1,772.65
  • Gas Taxes Paid: $265.02

Colorado residents pay more in taxes than the national average of $14,998.83 — and pay a higher percentage of their income toward taxes, on average. The reason: high income and sales taxes. Gas and property taxes paid in Colorado, on th other hand, are lower than the national average.

Connecticut: $22,475.88

  • Income Taxes Paid: $16,132.40
  • Sales Taxes Paid: $1,946.91
  • Property Taxes Paid: $4,014.45
  • Gas Taxes Paid: $382.12

Connecticut residents pay more in income taxes than any other state, in part due to a high median income of $72,889. Average property taxes paid in the state also are about double the national average of $2,118.08. In addition to high taxes, residents also are faced with a high cost of living in Connecticut.

Delaware: $12,703.29

  • Income Taxes Paid: $11,228.83
  • Sales Taxes Paid: $0
  • Property Taxes Paid: $1,202.88
  • Gas Taxes Paid: $271.58

Delaware is one of the most tax-friendly states, with residents paying just 21.99 percent of their income toward taxes. One of the key reasons the total tax bill is low here is because there is no sales tax. Plus, the average property tax paid is nearly half the national average.

District of Columbia: $21,143.09

  • Income Taxes Paid: $16,025
  • Sales Taxes Paid: $1,762.95
  • Property Taxes Paid: $3,080.28
  • Gas Taxes Paid: $274.86

Washington, D.C., residents pay more in property taxes, on average, than residents in most states due to a high median home value of $540,400. Residents also pay more in income taxes, on average, than any other state, with the exception of Connecticut.

On the plus side, the sales tax rate of 5.75 percent is below the national average. Residents also pay less than the national average to fill up their gas tanks.

Florida: $10,694.25

  • Income Taxes Paid: $6,357.50
  • Sales Taxes Paid: $2,084.88
  • Property Taxes Paid: $1,889.76
  • Gas Taxes Paid: $362.11

Florida is one of seven states with no income tax, so the average income taxes paid here reflect only federal taxes paid. Lower-than-average property taxes also help keep the total taxes paid as a percentage of income to just 21.9 percent in Florida.

Georgia: $13,393.88

  • Income Taxes Paid: $9,561.33
  • Sales Taxes Paid: $2,146.20
  • Property Taxes Paid: $1,361.70
  • Gas Taxes Paid: $324.65

The total taxes paid in Georgia are lower than the national average of $14,998.83. However, taxes actually consume a higher percentage of residents' income than the national average because of a low median income of $50,768 in the state.

Hawaii: $18,194.01

  • Income Taxes Paid: $14,798.36
  • Sales Taxes Paid: $1,333.71
  • Property Taxes Paid: $1,650.04
  • Gas Taxes Paid: $411.90

Hawaii residents have to pay a hefty tax bill to live in paradise. Total taxes paid are among the top 10 highest in the nation — due, in large part, to high income taxes. Residents earning a median household income of $64,514 pay around $14,798.36 in income taxes.

On the plus side, property and sales taxes in Hawaii are lower than the national average.

Idaho: $14,012.17

  • Income Taxes Paid: $10,460.25
  • Sales Taxes Paid: $1,848.80
  • Property Taxes Paid: $1,372.50
  • Gas Taxes Paid: $330.62

Total taxes paid in Idaho — $14,012.17 — are slightly below the national average. However, residents pay a higher percentage of their income toward taxes than the national average due to the state's low median income.

Illinois: $17,798.78

  • Income Taxes Paid: $11,519.99
  • Sales Taxes Paid: $2,649.02
  • Property Taxes Paid: $3,285.96
  • Gas Taxes Paid: $343.81

Hefty property and sales taxes contribute to a high total tax bill in Illinois. In fact, the average property tax bill is more than 50 percent higher than the national average — even though the median home value is below the national average. Overall, Illinois residents pay nearly 30 percent of their income, on average, toward taxes.

Indiana: $12,317.10

  • Income Taxes Paid: $8,826.05
  • Sales Taxes Paid: $2,146.20
  • Property Taxes Paid: $1,003.80
  • Gas Taxes Paid: $341.05

Indiana is a relatively tax-friendly state. The average total tax bill is lower than the national average because income and property taxes are lower in Indiana than in most other states.

Iowa: $16,765.61

  • Income Taxes Paid: $12,375.81
  • Sales Taxes Paid: $2,084.88
  • Property Taxes Paid: $1,976.26
  • Gas Taxes Paid: $328.66

Total taxes paid in Iowa are higher than the national average because residents pay more in income and sales taxes. Total tax paid as a proportion of income also is higher in Iowa — 27.55 percent versus 26.08 percent. However, a 2015 GOBankingRates study found that Iowa is one of the cheapest states for raising a family.

Kansas: $14,489.33

  • Income Taxes Paid: $9,968.50
  • Sales Taxes Paid: $2,642.89
  • Property Taxes Paid: $1,599.60
  • Gas Taxes Paid: $278.34

Average property taxes paid in Kansas are relatively low due to a less-than-stellar median home value. Average income taxes paid also are below the national average because of the state's low median wage. However, Kansas residents are hit by a high sales tax, which is 8.62 percent versus the national average 6.47 percent.

Kentucky: $10,243.63

  • Income Taxes Paid: $7,069.91
  • Sales Taxes Paid: $1,839.60
  • Property Taxes Paid: $1,042.86
  • Gas Taxes Paid: $291.26

Kentucky has the fourth-lowest average tax burden in this study. All taxes paid — income, sales, property and gas — are well below the national average. Income and property taxes paid are particularly low, on average, due to the state's low median income and property value.

Louisiana: $11,364.30

  • Income Taxes Paid: $7,130.86
  • Sales Taxes Paid: $3,059.87
  • Property Taxes Paid: $921.60
  • Gas Taxes Paid: $251.97

Average property taxes paid in Louisiana are among the lowest in the nation, as are income taxes due to the state's low median income of $45,922. Further, Louisiana has a higher-than-average sales tax of 9.98 percent.

Maine: $13,681.36

  • Income Taxes Paid: $9,475.25
  • Sales Taxes Paid: $1,686.30
  • Property Taxes Paid: $2,202.24
  • Gas Taxes Paid: $317.57

Total taxes paid in Maine are lower than the national average. But that doesn't mean residents don't face high taxes. Total taxes paid consume nearly 27 percent of residents' pay, on average, due to the state's low median income.

Maryland: $20,821.53

  • Income Taxes Paid: $15,950.47
  • Sales Taxes Paid: $1,839.60
  • Property Taxes Paid: $2,691.00
  • Gas Taxes Paid: $340.46

Maryland residents pay more in taxes than residents in all but three states. This is largely due to the high income taxes paid in this state, which has the third-highest median income in the nation.

Massachusetts: $20,814.36

  • Income Taxes Paid: $14,475.41
  • Sales Taxes Paid: $1,916.25
  • Property Taxes Paid: $4,127.89
  • Gas Taxes Paid: $294.81

Not only is Massachusetts one of the most expensive states to raise a family, more than 30 percent of what residents earn goes toward income, property, sales and gas taxes. That's a higher rate than all but four states: California, Connecticut, New Jersey and New York.

Michigan: $14,095.94

  • Income Taxes Paid: $10,005.63
  • Sales Taxes Paid: $1,839.60
  • Property Taxes Paid: $1,864.72
  • Gas Taxes Paid: $385.99

Michigan's property tax rate is higher than the national average. However, a low median home value helps keep down the average property taxes paid in the state. Income and sales taxes paid also are lower than the national average.

Minnesota: $20,322.49

  • Income Taxes Paid: $15,585.75
  • Sales Taxes Paid: $2,238.18
  • Property Taxes Paid: $2,190.24
  • Gas Taxes Paid: $308.32

On average, nearly 30 percent of what Minnesota residents earn goes toward income, property, sales and gas taxes. Average income taxes paid are particularly high, compared with other states.

Mississippi: $9,418.63

  • Income Taxes Paid: $6,323.80
  • Sales Taxes Paid: $2,167.66
  • Property Taxes Paid: $683.20
  • Gas Taxes Paid: $243.97

Mississippi residents pay the lowest total tax bill in the nation. Income taxes paid here are the second lowest in the country due to the state's low median income of $40,037. Plus, property taxes paid are among the lowest in the nation as a result of a low tax rate and median home value.

Missouri: $15,614.56

  • Income Taxes Paid: $11,591.25
  • Sales Taxes Paid: $2,419.07
  • Property Taxes Paid: $1,370.04
  • Gas Taxes Paid: $234.19

The total tax bill in Missouri is only slightly higher than the national average of $14,998.83, due to income and sales taxes that are higher than the average paid nationwide. However, property and gas taxes in Missouri are well below the national average paid.

Montana: $11,448.99

  • Income Taxes Paid: $9,662
  • Sales Taxes Paid: $0
  • Property Taxes Paid: $1,484.25
  • Gas Taxes Paid: $302.74

Montana is just one of four states with no sales tax. Property and income taxes also are lower than the national average. As a result, Montana residents see just 22.28 percent of their income, on average, go toward taxes.

Nebraska: $17,120.21

  • Income Taxes Paid: $12,374.28
  • Sales Taxes Paid: $2,112.47
  • Property Taxes Paid: $2,327.76
  • Gas Taxes Paid: $305.70

The total tax bill in Nebraska is higher than the national average. In large part, it's because residents pay more in income taxes as a result of a higher-than-average median income. Nonetheless, residents pay, on average, an amount equal to about 28 percent of their income.

Nevada: $11,505.87

  • Income Taxes Paid: $7,153.25
  • Sales Taxes Paid: $2,446.67
  • Property Taxes Paid: $1,565.36
  • Gas Taxes Paid: $340.60

Nevada has no state income tax, which explains why the state's total tax bill is among the lowest in the nation. However, residents are hit with a 7.98 percent sales tax, which is among the highest in the nation. If you're looking to buy a home in Nevada, best sure to check out Reno. It is the best city to buy a house in Nevada.

New Hampshire: $18,099.15

  • Income Taxes Paid: $13,070
  • Sales Taxes Paid: $0
  • Property Taxes Paid: $4,752.12
  • Gas Taxes Paid: $277.03

New Hampshire has no sales tax. It also doesn't have a state income tax, but the average amount of federal income taxes paid by residents is high because the state has the highest median income in the nation. Residents also pay more in property taxes than the national average paid. In fact, New Hampshire has the second-highest property tax rate in the U.S., after New Jersey.

New Jersey: $22,674.95

  • Income Taxes Paid: $13,765.28
  • Sales Taxes Paid: $2,100.21
  • Property Taxes Paid: $6,445.38
  • Gas Taxes Paid: $364.08

New Jersey residents pay the highest total tax bill in the nation. They also pay the highest percentage of income toward taxes — 33.17 percent, on average. The biggest reason the tax burden is so high in New Jersey is the state's 2.13 percent property tax rate, which is more than twice as high as the national average rate.

New Mexico: $10,942.90

  • Income Taxes Paid: $7,249.63
  • Sales Taxes Paid: $2,314.83
  • Property Taxes Paid: $1,133.88
  • Gas Taxes Paid: $244.56

Total taxes paid in New Mexico are among the lowest in the nation. Property and income taxes paid are well below the national average. This is due, in large part, to a low median income and a low median home value in the state.

New York: $18,462.09

  • Income Taxes Paid: $11,578.22
  • Sales Taxes Paid: $2,603.03
  • Property Taxes Paid: $3,872.28
  • Gas Taxes Paid: $408.56

Like their New Jersey neighbors, New York residents pay more than 30 percent of their income toward taxes. Residents pay a lot on the state's high sales tax of 8.49 percent and property tax of 1.38 percent.

North Carolina: $12,960.53

  • Income Taxes Paid: $9,204.50
  • Sales Taxes Paid: $2,115.54
  • Property Taxes Paid: $1,293.14
  • Gas Taxes Paid: $347.35

The total tax bill in North Carolina is lower than the national average thanks to lower-than-average property and income taxes. However, residents pay more in gas taxes.

North Dakota: $13,381.61

  • Income Taxes Paid: $9,244
  • Sales Taxes Paid: $2,078.75
  • Property Taxes Paid: $1,787.28
  • Gas Taxes Paid: $271.58

North Dakota residents have a lower total tax bill than the national average, paying around $13,381.61 every year. Gas and property taxes are lower than the national average, too.

Ohio: $13,456.62

  • Income Taxes Paid: $8,995.84
  • Sales Taxes Paid: $2,189.12
  • Property Taxes Paid: $1,967.21
  • Gas Taxes Paid: $304.45

Although the property tax rate in Ohio is higher than the national average, property taxes paid fall below the national average due to the state's low median home value of $125,300. Ohio residents also pay slightly less in income taxes overall, forking over just under $9,000 annually.

Oklahoma: $11,666.72

  • Income Taxes Paid: $7,768.50
  • Sales Taxes Paid: $2,716.48
  • Property Taxes Paid: $949.52
  • Gas Taxes Paid: $232.22

Oklahoma has one of the lowest total tax bills in the nation. Income and property taxes are well below the national average because median income and the median home value are among the lowest in the U.S. However, residents are hit by a high 8.86 percent state sales tax.

Oregon: $17,070.59

  • Income Taxes Paid: $13,811.75
  • Sales Taxes Paid: $0
  • Property Taxes Paid: $2,934.12
  • Gas Taxes Paid: $324.72

Oregon is just one of four states without a sales tax. Still, residents pay just over 28 percent of their income toward taxes. They face a high income tax bill.

Pennsylvania: $15,855.58

  • Income Taxes Paid: $11.102.44
  • Sales Taxes Paid: $1,943.84
  • Property Taxes Paid: $2,306.80
  • Gas Taxes Paid: $502.50

At 77 cents per gallon, the gas tax in Pennsylvania is the highest in the nation. Property and income taxes in this state also are higher than the national average. If that wasn't bad enough, the state is also home to one of the worst cities in the U.S. for investment properties — Pittsburgh.

Rhode Island: $16,390.97

  • Income Taxes Paid: $10,165.29
  • Sales Taxes Paid: $2,146.20
  • Property Taxes Paid: $3,735.74
  • Gas Taxes Paid: $343.74

Rhode Island residents pay over 29 percent of their income toward taxes. The big tax bite is due primarily to the state's high property tax rate of 1.51 percent. Income and sales taxes, on the other hand, are on par with the national average.

South Carolina: $11,887.57

  • Income Taxes Paid: $8,659.03
  • Sales Taxes Paid: $2,213.65
  • Property Taxes Paid: $784.30
  • Gas Taxes Paid: $230.58

South Carolina's total tax bill is among the lowest in the nation. Residents pay below-average income, gas and property taxes. Its sales tax, however, is above average at 7.22 percent.

South Dakota: $12,242.17

  • Income Taxes Paid: $7,917.50
  • Sales Taxes Paid: $1,959.17
  • Property Taxes Paid: $2,047.99
  • Gas Taxes Paid: $317.50

South Dakota has no income tax, which helps keep residents' total tax bill below the national average. Property and sales taxes paid also are slightly below the national average.

Tennessee: $10,138.87

  • Income Taxes Paid: $5,983.75
  • Sales Taxes Paid: $2,900.44
  • Property Taxes Paid: $993.60
  • Gas Taxes Paid: $261.09

Tennessee has no state taxes on income, but it makes up for it with a high sales tax rate of 9.46 percent — the second highest in this study. The average property taxes paid, on the other hand, are half the national average.

Texas: $13,690.99

  • Income Taxes Paid: $8,269.50
  • Sales Taxes Paid: $2,511.05
  • Property Taxes Paid: $2,658.53
  • Gas Taxes Paid: $251.90

The total tax bill Texas residents pay is lower than the national average because residents don't pay state income tax. And they pay lower gas taxes than residents in most states. It's no surprise then that cities like Plano, Lubbock and Austin rank among the best cities to live in when you're saving money.

Utah: $17,933.48

  • Income Taxes Paid: $14,028.65
  • Sales Taxes Paid: $2,072.62
  • Property Taxes Paid: $1,550.72
  • Gas Taxes Paid: $281.49

The overall tax bill in Utah is higher than the national average due to high income taxes paid by residents. However, the state does offer a high median household income of about $66,000. Meanwhile, the state's property tax rate is just 0.64 percent, compared to the national average of 1.02 percent.

Vermont: $17,961.50

  • Income Taxes Paid: $11,668.14
  • Sales Taxes Paid: $1,894.79
  • Property Taxes Paid: $4,091.18
  • Gas Taxes Paid: $307.40

Vermont residents pay more in property taxes than residents in most other states. As a result, total taxes paid in this state nearly top $18,000, far higher than the national average.

Virginia: $16,621.85

  • Income Taxes Paid: $12,628.20
  • Sales Taxes Paid: $1,726.16
  • Property Taxes Paid: $2,000.30
  • Gas Taxes Paid: $267.19

Virginia residents have a higher income tax bill than the national average, paying just over $12,600. But it's due, in part, to the state's median income, which is higher than the national average. Sales, gas and property taxes are all lower than national averages.

Washington: $17,101.83

  • Income Taxes Paid: $10,962
  • Sales Taxes Paid: $2,734.87
  • Property Taxes Paid: $2,960.19
  • Gas Taxes Paid: $444.77

Washington has no income tax. However, residents are liable to pay a lot in income taxes thanks to the state's high median household income of $67,243. The state sales tax is also high, at 8.92 percent.

West Virginia: $9,552.02

  • Income Taxes Paid: $6,748.85
  • Sales Taxes Paid: $1,928.51
  • Property Taxes Paid: $542.72
  • Gas Taxes Paid: $331.94

The total tax bill in West Virginia is the second lowest in the nation, after Mississippi. The typical property tax bill is also the second lowest in the nation, due to the state's low property tax rate of 0.53 percent and a low home value of $102,400.

Wisconsin: $15,907.56

  • Income Taxes Paid: $11,131.46
  • Sales Taxes Paid: $1,661.77
  • Property Taxes Paid: $2,777.80
  • Gas Taxes Paid: $336.53

Wisconsin residents pay a higher overall tax bill than the national average because of the state's high income and property taxes. In fact, Wisconsin is among the top 10 states that take the most out of your paycheck.

Wyoming: $12,363.88

  • Income Taxes Paid: $9,382.50
  • Sales Taxes Paid: $1,655.64
  • Property Taxes Paid: $1,047.60
  • Gas Taxes Paid: $278.14

Residents of this tax-friendly state pay only about 20 percent of their income toward taxes — the lowest percentage in the nation. Wyoming has no state income tax, and property and sales taxes in the state are well below national averages.

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

How are our tax dollars spent?

Whether the average tax liability is just under $10,000 or a little less than $15,000, it's still a lot of money for most people, and it's important to know where those dollars go. Pew Research broke down how the United States federal government spent $3.95 trillion in 2016, with senior writer Drew DeSilver noting that the country is basically a giant insurance company that has a side business in defense:

About $2.7 trillion -- more than two-thirds of the total -- went for various kinds of social insurance (Social Security, Medicaid and Medicare, unemployment compensation, veterans benefits and the like). Another $604 billion, or 15.3% of total spending, went for national defense; net interest payments on government debt was about $240 billion, or 6.1%. Education aid and related social services were about $114 billion, or less than 3% of all federal spending.

Every other program -- public broadcasting, NASA, national parks, foreign aid, and everything else -- adds up to the remaining 6% of the federal budget. Here's how each major spending area breaks down:

  • 24% Social Security
  • 15% Medicare
  • 15% Defense
  • 13% Health
  • 13% Income Security
  • 6% Net Interest
  • 5% Veterans Benefits
  • 6% Other
  • 3% Education

Historically, according to Pew, federal spending has hovered around 20% of gross domestic product (GDP). In 2016 total spending was 21.5% of GDP, and over the long term, the biggest growth in spending has been on the various human services programs (including Medicare and Social Security). The share of GDP spent on defense has actually fallen to 3.3% in 2016 after hitting a high of 6% in 1986.

What does this mean?

While individual Americans have no direct control over how their tax dollars are spent, it's important to know where the money goes. It's especially important to understand that any major increases -- say in defense spending, as President Donald Trump has proposed -- require cuts elsewhere. With more than two-thirds of the budget going to social insurance programs, it's hard, if not impossible, to make major changes without impacting those programs.

Most of your tax dollars go to taking care of other Americans, followed by paying for defense. The amounts devoted to everything else, including the most controversial and hotly debated government programs, amount to a relative pittance compared to the overall amounts being spent.

The $16,122 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,122 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.