Frequently Asked Questions

Tax brackets use a progressive system where different portions of your income are taxed at different rates. You don't pay the highest rate on all your income - only on the income that falls within each bracket.

For example, if you're single and earn $50,000 in 2025:

• First $11,000 taxed at 10% = $1,100
• Next $33,725 ($44,725 - $11,000) taxed at 12% = $4,047
• Remaining $5,275 ($50,000 - $44,725) taxed at 22% = $1,160.50
• Total tax: $6,307.50

Tax deductions reduce your taxable income, while tax credits directly reduce your tax liability dollar-for-dollar.

Common deductions include mortgage interest, charitable donations, and state/local taxes. Popular credits include the Child Tax Credit and Earned Income Tax Credit.

You should itemize only if your total itemized deductions exceed the standard deduction for your filing status.

2025 Standard Deduction amounts:

• Single: $14,600
• Married Filing Jointly: $29,200
• Head of Household: $21,900

Common itemized deductions include mortgage interest, state/local taxes (up to $10,000), charitable donations, and medical expenses exceeding 7.5% of AGI.

Nine states don't impose state income tax on individuals:

• Alaska
• Florida
• Nevada
• New Hampshire (only on interest and dividends)
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

However, these states may have higher sales taxes, property taxes, or other fees to compensate for the lack of income tax revenue.

You may need to file in multiple states if you:

• Live in one state but work in another
• Moved during the tax year
• Have income from rental property in another state
• Have business income in multiple states

Many states have reciprocity agreements that can simplify this process. You typically get credit for taxes paid to other states to avoid double taxation.

Self-employment tax covers Social Security and Medicare taxes for self-employed individuals. You pay this if you have net self-employment earnings of $400 or more.

The rate is 15.3% total:

• 12.4% for Social Security (on earnings up to $168,600 in 2025)
• 2.9% for Medicare (on all earnings)
• Additional 0.9% Medicare tax on earnings over $200,000 (single) or $250,000 (married filing jointly)

You can deduct half of your self-employment tax as an adjustment to income.

The difference is based on how long you held the investment:

• Short-term: Assets held for one year or less - taxed as ordinary income
• Long-term: Assets held for more than one year - taxed at preferential rates (0%, 15%, or 20%)

Long-term capital gains rates for 2025:

• 0% for single filers with income up to $47,025
• 15% for single filers with income $47,026 to $518,900
• 20% for single filers with income over $518,900