It was a close call: this year, I barely got my federal taxes in the mail before the April 15th deadline. The reason for my (rare) procrastination? Because for the first time, I actually owed income taxes, instead of receiving a nice, fat refund from Uncle Sam.
Each year after I send in my taxes, I like to take a look at my effective tax rate. This is big picture stuff that basically lets you know how what percentage of your income you’re actually paying the government, since the federal tax rates – you know, the brackets that dictate how much we’re supposed to pay – are only a rough starting point.
Here’s how my 2012 effective tax rate boiled down:
(Note: I am only looking at my federal income taxes, not my overall effective tax rate, which would include everything from federal taxes to state income taxes, local property taxes, even sales tax.)
- I paid 10%, or $1,740, on the first $17,400 of income (I jointly filed with my husband, as I have every year since our marriage)
- I paid 15%, or $6,737.40, on the rest of my income above $17,400 (that was an additional $44,916; we did not make it into the 25% tax bracket in 2012)
That’s a total of $8,477.40 in federal taxes my husband and I owed the government, before accounting for all our deductions and credits. When you take those into account, our tax burden was only $5,361.
You can find the total taxes owed on line 61 of your 2012 1040. To find your total income, look on the first page of your 1040; the number is on line 22. To find your effective tax rate, divide the number on line 61 by the number on line 22. For me, the equation looks like this:
$5,361 / $62,316 = 0.086, or 8.6%
Now, that’s well below the 15% the bulk of our income fell into last year. It’s also below the tax rate of 13.6% we would have paid the government if we hadn’t had any deductions or credits.
However, it’s wayyyyyyy higher than we’ve paid in years:
- 6.7% in 2010
- 4.5% in 2011
In other words, we didn’t do as good of a job as reducing our tax burden with additional tax credits and deductions in FY 2012 as we did in 2010 and 2011.
What was your effective tax rate in 2012? How did it vary from 2011?