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You can use tax tables to easily figure out how much taxes you have to pay. At a glance, you can see how much taxes are owed on your taxable income depending on your filing status just by looking at the 2008 tax brackets. This quick look can also help you figure out what the right filing status is for you.
There are a few simple steps to calculate your income taxes using the 2008 tax tables which are available from the IRS website and the tax instructions.
Figuring out how much money you made is the first step. This is pretty simple and you can get it off your pay check or W2.
Figuring out your deductions is the next step. This too is very simple, but will involve more numbers. Assuming you are itemizing, you can subtract $3500 for each person in your household, including yourself. Next deduct the mortgage interest and property taxes you paid on your house. Charitable contributions, like donations to your church, also get deducted from your income. If you have student loans, the interest you paid on those could also be included, but that depends on your income.
State income taxes can add another element you have to consider. If you live in a state where you have to pay state income taxes, and most people do, you get to deduct the amount you paid in state taxes from your income. However, you also have to claim last years state income tax return as income. Just keep that in mind when doing your calculation.
Now that you have your income and deductions figured out, subtract your deductions from your income to determine your taxable income. Now you can go to the tables and determine how much tax you have to pay. Hopefully it is less than you had taken out of your pay check and you will get a big refund.
One note on using the 2008 tax tables. The tax rate you pay is not a set number for all of your income. Some of your income will be taxed at 10%, some at 15% and so on.
Here is a quick example. Let’s say you are single and have a taxable income (after your deductions are subtracted) of $40,000. You take 10% of the first $8,025, 15% of $32,550 minus $8,025, and 25% of $40,000 minus $32,550.
This can get a bit confusing so I recommend you just take advantage of some of the great online tax software available. You can save a bunch of money versus going to your local tax man and you will get a faster (and probably better) refund check than doing them yourself by hand.
For the record, I am not a tax professional. I have been doing my own taxes by myself or with the help of a tax professional for 20 years so I know a few things, but I cannot offer you legal advice.
I recommend automated software because it is very good at reminding you of things that you can legally deduct, but won’t let you accidentally do things that will get you in trouble. If you have a complex return, you really should seek a tax professional as spending a little extra money is better than big fines if you get audited.