You may have heard about the One Big Beautiful Bill Act (OBBBA) which was signed in to law on July 4th, 2025. Critics deem the name a misnomer calling it Ugly rather than Beautiful, but I think almost everyone agrees it is in fact Big. There are dozens of provisions. Some go into effect immediately, others are implemented in later tax years. Some provisions end in various future years, while others are “permanent”, or as permanent as anything can be when it comes to legislation. Many of my clients are retirement age, so today I will review the OBBBA provision that effects most taxpayers over 65 and begins this year. Starting in 2025 (but ending after the 2028 …
Taxes
How Much Federal Income Tax Do You Actually Pay?
Taxes are always on my mind, but I suspect we will all be hearing a lot about taxes for the rest of the year. That’s because unless Congress takes action, several provisions of the 2017 Tax Cut and Jobs Act (TCJA) are set to expire on December 31st, 2025. According to the Tax Foundation about 62% of tax payers will see a tax increase if the TCJA is allowed to expire. About 29% of taxpayers would see no change. Which bring me to the topic of today’s newsletter. How much Federal income tax do you *actually* pay? I believe every American should know the answer to this question. In my experience, most people don’t have any idea what they pay. In fact, take a guess as …
How Much Social Security Tax do you Pay?
In my last blog article, I reviewed Federal income tax liability. Today we move to Social Security tax. Almost all workers, whether they work for themselves or someone else, pay Social Security taxes. How much do you pay? Let’s begin with taxpayers who work for someone else. Employees pay Social Security tax of 6.2% on their Social Security wages. This is automatically withheld from pay. Their employers also pay 6.2% of pay for a total of 12.4%. You can see this on your W-2 form, Boxes 3 and 4: This client had Social Security wages (Box 3) of $142,813.91 This number multiplied by 6.2% = Social security tax withheld (Box 4) of $8,854.46 Her employer also paid …
How Much Federal Income Tax do you Actually Pay?
Taxes are on my mind this month as tax season is in full swing. Also you may have heard there is a Presidential election later this year. I probably follow tax policy discussions more closely than the average bear, but I suspect everyone will be hearing a lot about who does or does not pay their fair share of taxes during the campaign. What’s more, several provisions of the 2017 Tax Cut and Jobs Act, including lowered individual tax rates are set to expire on December 31st, 2025. We will also be hearing a lot about whether these cuts should be extended. Which bring me to the topic of today’s newsletter. How much Federal income tax do you *actually* pay? I believe …
How Much Income Tax Do You Actually Pay?
Last year, a new client and I were reviewing her expenses. I pointed out that her largest expense (by far) was her Federal/State income tax liability at nearly $20,000 a year. In fact for many people, their largest lifetime expense is income taxes. She looked at me quizzically and exclaimed “But I always get big refunds!” I wanted to weep. Generally when you get a refund, it is because you paid in more than you actually owe. Most taxpayers pay their tax liability throughout the year in the form of tax withholdings. Your employer withholds tax from your paycheck and sends it to the government during your working years. In retirement tax can be withheld from …
