01
Brackets are slices, not a single rate
Each slice of income is taxed at its own rate. Moving into a higher bracket only taxes the dollars above that threshold, so your effective rate is always lower than your bracket.
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LI-005
Taxes Explained
Taxes feel hard because the words are unfamiliar, not because the math is. Here is the plain-language version.
GovernmentIntermediate 7 min read
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02
What comes out of your paycheck
Three separate things, all shown on your pay stub.
- Federal withholding — an estimate of what you'll owe the IRS.
- State tax — depends on where you live; a few states have none.
- FICA — 7.65% for Social Security and Medicare.
03
W-2 vs. 1099
Employees get a W-2 with taxes already withheld. Contractors get a 1099 with nothing withheld — you owe the tax yourself, often quarterly, so set aside roughly 25-30% of each payment.
04
Filing, step by step
Gather your W-2s and 1099s, then file free through IRS Free File or a free provider. The deadline is April 15.
- A refund means you overpaid through withholding — it's your own money returned.
- If you can't pay, file anyway and request a payment plan. Late filing penalties are far worse.
Remember this
- The standard deduction beats itemizing for most people early in their career.
- Freelancers: save 25-30% of every payment for tax.
- File on time even if you can't pay in full.
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LI-006
Insurance Basics
Premiums, deductibles, and which policies are genuinely worth buying.