Starting a new job is a lot like starting the first day at a new school. You’re pretty nervous , wondering what will come, what the people will be like and how well you’ll do. Will you impress everyone? Are you wearing the right outfit?
Soon enough, though, you’re pretty comfortable, getting to know your coworkers and familiarizing yourself with the workflow and job responsibilities.
However, one thing we never really seem to get used to is those seemingly arcane deductions on our pay stubs, ranging from various insurance premiums to retirement and taxes. At times, it can be difficult to wrap your head around what you’re paying and why, especially when it comes to taxes.
Of course, there are the basics. For example, how much you’ll pay in federal taxes depends largely on how much taxable income you’ve made, with rates rising as you climb into various tax brackets. If you work for someone else, both you and your employer will pay portions of the payroll and Medicare taxes, while the self-employed will need to foot the entire bill.
Also, it’s important for people new to the workforce to keep in mind that your taxable income is often significantly different from your gross income. While everyone is allowed certain standard deductions based on their number of dependents, you can accrue other deductions as well. Exploring potential deductions can result in significant savings.
Any expenses associated with moving for a new job are tax deductible, as are medical expenses–so long as they comprise more than 7.5% of your adjusted gross income. There are some lesser-known legitimate tax deductions, though. For instance, if your child is studying clarinet to ease a pernicious overbite, you can deduct everything you spend on her instrument and lessons. You may even be able to deduct some of the cost of pet care if you use an animal to protect your small business.
If you keep track of your expenses and take the time to find the deductions available to you, it’s possible you could end up with a fuller bank account come tax time. Regardless, it’s always helpful to know how much you’re paying and why.
[Via: Paycor Payroll Software]