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3: Analyze Your Habits

Analyze Your Tax Liability

a tax form surrounded by money, a calculator and calendar

How your salary affects your tax liabilityThe amount of taxes you owe on your income. It can also include taxes on self-employment or tax penalties for early withdrawal of IRA monies and lack of health care coverage. is often overlooked when determining salary requirements. Overall, the amount of federal and state taxes you pay through your paycheck depends on several conditions:

Current income tax rates

Your gross income.

Your filing status (single, married filing jointly or separately, head of household)

The number of dependents and allowances you claim on your W-4 form

Work benefit programs that lower or defer taxes

Payroll Taxes

Your employer pays a portion of many of your payroll taxes on your behalf. (If you are self-employed, you pay both the employer and employee sides of the tax.) Your pay stub will show all the deductions your employer takes out of your paycheck, including:

federal income tax table explained

SAM tips

Before you accept a new position, pay attention to what will happen with the income you earn.

If you will earn more than you do currently, what impact will the extra earnings have on your tax liability?

How will your new income or taxes impact your discretionary income?

Would your new salary exceed what you could expect from a current employer if you were to receive a raise or bonus in the coming year?

Is there anything less tangible you are giving up for a bigger salary?

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