Paying income taxes

If you earn income or have income from other sources, you’re probably required to pay federal income taxes. You may pay state and sometimes local income taxes as well, if the state or city where you live or work collects income tax. The good news is that federal tax rules are the same no matter where you live. But the way states and local governments tax income varies from place to place, so you do need to check what you’re responsible for paying.

Filing Status

Whether you are required to file a tax return and the amount of tax you owe is determined by several factors. The first of these is what’s known as your filing status, and you must use one of the five filing statuses:

Single, which includes anyone unmarried, widowed, divorced or legally separated as of the last day of the year

Married filing jointly, which includes married couples, people with legally recognized common law marriages and anyone whose spouse died during the tax year

Married filing separately, which includes legally married couples whether or not they live together

Qualifying widow or widower with a dependent child, which covers widowed people in the two years following the year in which their spouses died, provided a qualifying dependent lives in their household

Head of household, which refers to an unmarried adult who maintains a home and supports a qualifying relative

You must file using a status that accurately describes your status, but if you fit more than one description, you have the right to choose the filing status that results in the lowest tax. For example, a single person who is also a head of household may pay less tax on the same income by filing as head of household as opposed to filing as single.

Tax rates

The second factor that determines the tax you owe is your tax bracket, or income range. There are six brackets, and each one is taxed at a different tax rate. The lowest rate for 2006 is 10% and the highest is 35%. Each filing status has different income ranges for each bracket, so make sure you’re looking at the right filing status when determining your tax percentage rate. For example, if you’re a single filer and make $50,000 a year, you’re most likely in the 25% tax bracket.

For more information on tax brackets, click here.