Taxes 101
Taxes feel scary because the words are unfamiliar — not because the math is hard. Here's the version nobody taught you in school.
How U.S. income tax actually works
The U.S. uses brackets: each slice of your income is taxed at a different rate. Earning into a higher bracket only taxes the dollars above the threshold — not your whole salary. Your effective rate is almost always lower than your bracket.
- Federal tax: paid to the IRS every paycheck (withholding).
- State tax: depends on where you live — some states have none.
- FICA: 7.65% for Social Security + Medicare, automatic.
W-2 vs. 1099
If you're an employee, you get a W-2 in January summarizing wages and taxes withheld. If you're a contractor or freelancer, you get a 1099 — no taxes withheld, so you owe them yourself (often quarterly).
Standard vs. itemized deduction
The standard deduction (~$14,600 single in 2024) is a flat amount the IRS lets you subtract from your income. Itemizing only beats it if you have huge deductions (mortgage interest, big charitable gifts, large medical bills). For most people under 30, the standard deduction wins.
Filing — what to actually do
Most people can file free with IRS Free File, FreeTaxUSA, or Cash App Taxes. Deadline is April 15. You'll need your W-2s/1099s, Social Security number, and last year's return if you have it.
- Owe money? You can pay online at irs.gov/payments.
- Getting a refund? File early — direct deposit takes 2-3 weeks.
- Can't pay? File anyway and set up a payment plan. Late-filing penalties are way worse than late-payment.
Glossary
- AGI
- Adjusted Gross Income — your income minus a few specific deductions. Many tax credits use this.
- Withholding
- Tax your employer takes out of each paycheck and sends to the IRS for you.
- Refund
- Money back because you overpaid through withholding — not free money, just your own returned.
- Tax credit
- A dollar-for-dollar reduction of tax owed. Much more powerful than a deduction.
Next steps
- Find your W-2 or 1099 in your email or employer portal.
- Try IRS Free File at irs.gov to see what filing looks like.
- Add 'File taxes by April 15' as a goal in your planner.