Minimizing your taxes

Why do we have to pay taxes?

Imagine a day where all goods and services provided by the government stop.

First, all public agencies including public schools would close. Your teachers, principals, clerks, and custodians would not be there. The subway, trains and buses would not run, water would not be pumped, garbage would go uncollected, airport security would not be on duty, planes would not take off, police and fire departments would not show up and daily life as it is known would shut down. These goods and services and many more, provided by federal, state and local governments, are paid for by the taxes people and businesses pay on INCOME , WEALTH and CONSUMPTION .

Federal taxes pay for: defense and international security assistance; SOCIAL SECURITY ; MEDICARE and MEDICAID ; safety net programs and programs that assist low-and moderate-income working families; interest on the national debt; education; scientific research; cost of government.
  • State and City taxes pay for law enforcement, fire departments, education, sanitation, city and state governments.
  • Taxes are collected by state, local and federal (Internal Revenue Service) tax agencies.
Societies can debate whether the benefits of the goods and services provided by government are worth the reduction in income.

How tax collection works

Income is reduced by taxes — leaving less for our personal goods, services, savings and investment.
Taxes on income levied by federal, state and local taxing authorities are progressive meaning higher income groups are taxed at higher rates than low-income groups.
  • The official income tax rate starts at 10 percent and goes all the way to 37 percent.
  • It’s important to understand that moving into a higher tax bracket does not mean that all of your income will be taxed at a higher rate. Instead, only the money that you earn within a bracket is subject to that particular tax rate
The government begins taxing you based on the information you provide on your W-4 FORM when starting a job. The information you complete, instructs your employer how much to withhold from GROSS PAY based on your filing status i.e. Single; Married Filing Jointly; Head of Household.
Single filing individualMarried filing jointly
(& surviving spouses)
Head of household
Tax rateTaxable incomeTaxable incomeTaxable income
10%$0 — $9,525$0 — $19,050$0 — $13,600
12%$9.525 — $38,700$19,050 — $77,400$13,600 — $51,800
22%$38.700 — $82,500$77,400 — $165,000$51,800 — $82,500
24%$82,500 — $157,500$165,000 — $315,000$82,500 — $157,500
32%$157,500 — $200,000$315,000 — $400,000$157,500 — $200,000
35%$200,000 — $500,000$400,000 — $600,000$200,000 — $500,000
37%Over $500,000Over $600,000Over $500,000
By January 31 of each year, your employer/s will send you a W-2 FORM .
  • This form includes total earnings before taxes for the prior year. Also, included on this form is the amount withheld for federal and state and local taxes and for FICA (Social Security and Medicare).
  • If you receive a W-2 or 1099 FORM , you will need to complete federal/state/local TAX RETURN by April 15th.
  • When completing the tax return, you will use information from the W-2 and will complete information for deductions and credits that may lower your tax liability.
  • You might be entitled to a refund from the government, but if you underpaid taxes, you might owe money.
If you don’t owe federal taxes, you might still owe NYS and NYC taxes because the rules are different.
  • NYS/NYC have different standard deductions, so different income thresholds for filing taxes.

Reducing tax liability

When filing your taxes depending on the amount of your income and the eligible deductible expenses you may have, you can choose either to claim the STANDARD DEDUCTION or, to ITEMIZE your deductions (eligible expenses).
If you choose the standard deduction depending on your filing status, the amounts in the chart are subtracted directly from your taxable income before income tax is calculated.
Single filing statusMarried filing jointlyHead of household
$12,000 if under age 65$24,000 if both spouses under age 65$18,000 if under age 65
$13,600 if under age 65$25,300 if one spouse under age 65 and one age 65 or older$19,600 if age 65 and older
$26,600 if both spouses age 65 or older
You can consider itemizing your deductions if your eligible deductions exceed the standard deduction.
Some of the itemized deductions allowed by the IRS that are commonly used by taxpayers would include:
  • Home mortgage interest.
  • Charitable donations.
  • State income taxes paid.
  • Real estate taxes paid.
  • Out-of-pocket medical and dental expenses.
In addition to deductions, taking TAX CREDITS are another way to lower the amount of taxes you will owe.
  • Tax Credits provide a dollar-for dollar reduction of your income tax once the amount that you must pay has been calculated.
There are many important tax credits available for individuals and families who do not earn a high income. Some tax credits like the EARNED INCOME TAX CREDIT may even increase your refund or provide you with a refund even if you didn’t owe any taxes.
  • In addition, there are Child and Dependent Care and Educational tax credits that will lower the amount of taxes you owe.

Resources to help you understand taxes

Free NYC Tax Prep