You're likely familiar with that disappointing moment that comes when you open your paycheck only to be reminded, once again, that however much you might be earning, Uncle Sam is taking a large slice of it. With so much of your hard-earned money disappearing before your eyes, it's easy to fantasize about what it might be like if you could avoid paying taxes entirely and keep the whole check.
Of course, it's just a fantasy — taxes are unavoidable. GoBankingRates looked at data from the Bureau of Labor Statistics for Americans in each of four different age groups to see just how much they are paying in taxes.
2016 Income Before Personal Taxes: $66,470 2016 Income After Personal Taxes: $58,862 Difference: $7,608 10-Year Accumulation: $76,080
The 25-34 age bracket includes many recent college graduates who have the lowest average income of any age group. Many people in their late 20s and early 30s are going to be struggling with student loans. Routing over $75,000 to the government for taxes rather than paying down student-loan debt is likely to sting a bit. That tax bill is more than double the $37,172 owed per each graduating student in 2016, as calculated by student loan expert Mark Kantrowitz.
Although millennials have typically been waiting until later in life to purchase homes, there's still plenty who are likely to start having to pay property taxes before they turn 35. Home ownership has plenty of benefits, but property taxes clearly aren't one of them. The $10,200 you'll pay over the course of a decade could potentially feed a family of four for a full calendar year.
Annual Federal Income Taxes: $5,692 10-Year Accumulation: $56,920
Federal taxes are usually going to take the biggest bite out of your paycheck, and that's still true even when you're young. By the end of 10 years, your tax bill just for federal income taxes will almost be equivalent to your full year's take-home pay during this period.
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Ages 25-34 — State and Local Income Tax
Annual State and Local Income Taxes: $1,866 10-Year Accumulation: $18,660
State and local taxes are typically much lower than at the federal level, especially for people in lower income brackets. That said, it's still clearly taking a significant bite out of your budget. Between the ages of 25 and 35, you're likely to pay nearly $20,000 in income taxes to your state and municipality, enough to buy a new car provided you're OK with a relatively modest sedan.
2016 Income Before Personal Taxes: $92,576 2016 Income After Personal Taxes: $79,271 Difference: $13,305 10-Year Accumulation: $133,050
Your mid-30s to your mid-40s is typically an important time in your life. You're likely advancing in your career and your income is rising to reflect that, but you're also probably taking on a raft of new financial responsibilities, like starting a family and owning a home. Unfortunately, even though you have a lot of important new things to spend that money on, making more money also translates to paying more in taxes, close to double what you shelled out during the previous decade of your life. For context, $133,050 is more than the median home value in 10 different U.S. states.
Owning property is a big step in anyone's life, and spending your hard-earned dollars on home equity rather than rent is something that can pay big dividends in the long term. It does, however, mean paying property taxes, which means yet another bite out of your annual income, and over $20,000 by your mid-40s. Given that the average down payment on a house is 11 percent, the typical property tax bill for this portion of your life comes to more than the average down payment on a $180,000 house.
Annual Federal Income Taxes: $10,439 10-Year Accumulation: $104,390
Earning enough to push you into a higher tax bracket will mean paying at a higher rate, which will mean a big chunk of your salary winds up going to the Federal Government. Over the course of 10 years, you'll send a cool six figures to Uncle Sam, almost double the median annual salary in America.
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Ages 35-44 — State and Local Income Tax
Annual State and Local Income Taxes: $2,819 10-Year Accumulation: $28,190
Being in a higher tax bracket usually means a significantly higher tax burden at the state and local level, too. You'll spend about another $1,000 a year in your mid-30s to mid-40s than the previous decade of your life. That can add up, with the $28,190 tax bill coming to more than it would cost you to rent a one-bedroom apartment for a year in Washington, D.C., Chicago, or Los Angles.
2016 Income Before Personal Taxes: $99,423 2016 Income After Personal Taxes: $83,084 Difference: $16,339 10-Year Accumulation: $163,390
During a time in your life when you're likely to begin sending kids to college and thinking seriously about retirement, you also hit the highest average rate of taxation, with a 16.4 percent bite getting taken out of your annual salary. That $163,390 over a decade winds up being more than enough to cover the average cost of four years of in-state tuition at a public university for four different kids.
While the increase isn't as steep as it was for the 35-44 age group, you can still expect to see your property tax burden climb in your middle age. Ultimately, you'll wind up shelling out nearly $25,000 to pay property taxes during these 10 years of your life. For context, if you had been fortunate enough to set aside $5,000 at age 30 and let it accumulate interest at a 7 percent rate, compounding annually, your almost quarter-century of diligence would leave you with a little over $2,000 after covering your property taxes for just the last decade.
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Ages 45-54 — Federal Income Tax
Annual Federal Income Taxes: $12,979 10-Year Accumulation: $129,790
Your 10-year tax bill just for the federal government during your prime earning years will come to nearly $130,000. That would be more than enough to cover the Tesla Model S P100D, which boasts the ability to go 0-60 in just 2.5 seconds or just about enough to cover the ultra-luxurious hybrid 2018 Karma Revero, in case you were looking to have a particularly stylish mid-life crisis.
Ten years of state and local taxes might not reach the level of a top tier Tesla like your federal taxes might, but $32,080 would more than cover the cost of 100 shares of stock in Tesla, which could very well be a much wiser investment for someone beginning to stare down retirement than a sports car.
2016 Income Before Personal Taxes: $80,474 2016 Income After Personal Taxes: $67,814 Difference: $12,660 10-Year Accumulation: $126,600
In the final decade before retirement, you've left your prime earning years, and plenty of people are even finding ways to retire early. However, it can be a crucial time to put away cash so that you can live happily and healthily after you stop working. However, according to a report issued by the United States Government Accountability Office, the average American 55-year-old has only around $104,000 saved for retirement, which isn't even enough to cover their projected tax bill over the next 10 years of their life.
In every other tax category, the 55-64 age group sees its total tax bill and tax rate decrease from what it was paying in the 10 years prior. Property taxes are the exception, where both the total amount and the rate increase. That $25,020 over 10 years is pretty steep, especially when you consider that, if you're retiring this year, based on that $80,474 income, a full year of social security benefits is less than $20,000.
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Ages 55-64 — Federal Income Tax
Annual Federal Income Taxes: $10,053 10-Year Accumulation: $100,530
Paying your federal income taxes might hurt a little bit less as you fast approach the age where you can finally take advantage of Social Security and Medicare. On the other hand, forking over $100,000 is never easy, especially when you consider that your 10-year federal tax bill is just about the average cost of a 31-35-foot yacht, something you could probably get a lot of use out of in retirement. Be aware of tax loopholes, too — some can save you thousands of dollars.
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Ages 55-64 — State and Local Taxes
Annual State and Local Income Taxes: $2,511 10-Year Accumulation: $25,110
You'll likely pay over $25,000 in state and local income taxes alone in the final 10 years before you retire. At a time when you may be thinking about what you can pass along to your family, that can be a hard hit to absorb. For those who have a first grandchild and want to set something aside for their college education, that $25,000, compounding annually at a modest 7 percent interest, would be nearly $85,000 by the time your grandchild is finishing high school.
All told, taxes end up taking up a big portion of your annual income. Here's the total bill for your career, from a spry, young age of 25 to the eve of your retirement at 64:
Total Personal Tax Bill 25-64: $499,120 Total Property Tax Bill 25-64: $79,910 Total Federal Income Tax Bill: $391,630 Total State and Local Income Tax Bill: $104,040
Over the course of your 40-year career, you'll end up spending more than half a million dollars on taxes. That staggering sum is more than half of what it would take to retire comfortably in 28 different states if you had responsibly squirreled it away over the last four decades. Or, if you're so inclined, the total could cover the average cost of a 50-foot yacht.
Methodology: All data is from the 2016 Bureau of Labor Statistics Consumer Expenditure Survey, annual difference of income before and after taxes, multiplied by 10 for 10-year accumulation. The 10-year accumulations and totals do not account for inflation or opportunity costs of not collecting interest or investment returns on money paid in taxes.
Generally, when you give money to a charity, you can use the amount of that donation as an itemized deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.
Married couples have the option to file jointly or separately on their federal income tax returns. The IRS strongly encourages most couples to file joint tax returns by extending several tax breaks to those who file together. In the vast majority of cases, it's best for married couples to file jointly, but there may be a few instances when it's better to submit separate returns.