Fed Taxes and no deductions

[1421windsong]

I made $72,572 last year with $8943 taken out in taxes.   I'm concerned that I am told I owe $44 (not worried about paying that).   I thought I would have received a tax refund.  I claimed 0 exemptions on my paycheck,  and had a tiny bit of interest income ($150).  No deductions at this point.  I'm concerned for next year and looking for advice if the first/second sentence sounds correct and should I expect a hefty tax bill next year?   Thank you...only been in the full time workforce for 2 years.

[MayaD]

If your filing status is single and your Income is $72572, your 2021 marginal tax rate in %22. 

Please check the Free Tax Bracket Calculator 2021 to estimate your 2021 taxable income

[1421windsong]

Does "marginal tax rate" mean I owe 22% of my income to Fed taxes, because as stated, only paid $8943 in taxes.   I don't think my max Roth IRA 401k reduces my tax rate, correct?   Should I open an IRA in early 2023 and make that contribution to lower my tax owed as a possibility, once I see what Turbo tax says?  Thank you

[BillM223]

"Does "marginal tax rate" mean I owe 22% of my income to Fed taxes, "

No, "marginal tax rate" means that you owe 22% of the next dollar you earn. It is not the rate applies to all of your taxable income.

Instead, what happens is this (from the IRS website:(

Marginal Rates: For tax year 2021, the top tax rate remains 37% for individual single taxpayers with incomes greater than $523,600 ($628,300 for married couples filing jointly). The other rates are:

       *  35%, for incomes over $209,425 ($418,850 for married couples filing jointly);

• 32% for incomes over $164,925 ($329,850 for married couples filing jointly);
• 24% for incomes over $86,375 ($172,750 for married couples filing jointly);
• 22% for incomes over $40,525 ($81,050 for married couples filing jointly);
• 12% for incomes over $9,950 ($19,900 for married couples filing jointly).
• The lowest rate is 10% for incomes of single individuals with incomes of $9,950 or less ($19,900 for married couples filing jointly).

So (assuming you are filing Single) if your taxable income was $9,951, then your tax would be $995 (10% of $9,950, lowest tax rate) plus 12% of $1 (next marginal tax rate).

Do you see how that works?
     

"I don't think my max Roth IRA 401k reduces my tax rate, correct?"

No, contributions to a Roth IRA or Roth 401(k) (these are radically different) do not reduce your taxable income.

"Should I open an IRA in early 2023 and make that contribution to lower my tax owed as a possibility, once I see what Turbo tax says?"

Sure, but you should also consider opening an IRA now (before April 18, 2022 and before you file) and making a contribution for tax year 2021, which will lower your taxable income. Didn't you see the screens in TurboTax that told you about that?(maybe not, this screen appears in the File section, so maybe you haven't gotten that far).

[TaxAl]

 No, a marginal tax rate of 22% means you pay $0.22 in tax any additional dollar you make. The US has a graduated income tax where you pay a higher rate as you make more money. It starts out at 10%, then goes to 12%, 22%, 24%, 32%, 35%, and 37% for singles. For a single person last year, you pay 10% of the first $9950, 12% of income between $9950 and $40525, 22% of income between $40525 and $86375, and so on.

Note that the taxable amount includes wages and interest and subtracts deductions (it gets more complicated, but that's the rough idea). So if you made $72572 in wages, plus $150 in interest, and used the standard deduction of $12550, your taxable amount is $60172.

[1421windsong]

Thank you, I appreciate it.

[1421windsong]

Thank you