Nobody likes to pay income taxes, but nearly everyone ends up paying the IRS at least something. Even if you get a refund, it’s only because you’ve usually had money taken out of your paycheck already to go toward your tax bill.
Whether you’re doing some advance tax planning or getting set to start preparing your tax returns, it’s helpful to have a sense of what your tax bill is going to look like. For households earning $100,000, tax bills can vary dramatically. Below, we’ll run through some common scenarios and how they’ll apply on the 2020 tax returns that are due in April 2021. Even if your situation doesn’t match up exactly with one of them, they should give you a sense of what to expect on your final tax return.
What a single person with no children might pay in income tax
First, let’s look at a single person who makes $100,000 and has no children or other dependents. People in many different stages of life can fall into this category, whether it’s a young worker in a high-income profession who hasn’t yet started a family, a divorced person who either has no children or whose ex-spouse claims the children as dependents, or a retiree drawing taxable distributions from 401(k) plan accounts or traditional IRAs.
The biggest variable with income taxes is whether you claim the standard deduction or itemize your deductions. The vast majority of people take the standard deduction, though, so we’ll assume for these calculations that this taxpayers does, as well. We’ll also make the assumption that any investments are held in tax-favored accounts that don’t have immediate tax consequences.
In this situation, gross income of $100,000 would be reduced by the standard deduction of $12,400. That leaves taxable income of $87,600. The tax on that income is $15,103.50. Assuming you don’t qualify for any tax credits or other deductions, that’s the tax bill you’ll have to pay through a combination of income tax withholding, quarterly estimated payments, and a final payment with your tax return.
What a married couple with two young kids might pay in income tax
Next, let’s take a look at a married couple with two kids, who have a combined household income of $100,000. For these purposes, it doesn’t matter whether both spouses work or how the income divides up between the two of them. We’ll again assume that the standard deduction applies and that all taxable income comes from sources that will be taxed at ordinary income rates.
For this family, the standard deduction is $24,800, twice what the single standard deduction is. That brings $100,000 in gross income down to $75,200 in taxable income. Moreover, the tax brackets for married couples who file jointly are more favorable. The calculated tax ends up being $10,892.
However, in this case, you wouldn’t stop here. It’s likely that the two children would qualify for the child tax credit, which reduces taxes by another $2,000 per child. That brings the final tax down to $6,892.
| Item | Single, No Dependents | Married Filing Jointly, Two Children |
|---|---|---|
| Gross income | $100,000 | $100,000 |
| Standard deduction | ($12,400) | ($24,800) |
| Taxable income | $87,600 | $75,200 |
| Tentative tax | $15,104 | $10,892 |
| Tax credits | $0 | $4,000 |
| Net tax owed | $15,104 | $6,892 |
Other factors to consider
These examples were pretty simple, but your situation might well be more complicated. Here are some things to take into consideration as you run through your own taxes:
- If you have more in itemized deductions than the standard deduction would give you, then itemizing will reduce your tax bill further than the standard deduction will.
- These examples assumed that you don’t qualify for any other deductions or credits. However, there are many ways to reduce your taxable income or your total tax owed. Making traditional IRA contributions, for instance, lets you lower your income up to the annual contribution limit. Credits like the earned income credit, the American Opportunity and Lifetime Learning education credits, and the saver’s credit can cut your tax bill.
- Your family situation also has an impact on your taxes. Many single people with children qualify for head of household status, which brings lower taxes than the tax brackets for most single filers. Similarly, if your spouse has recently died, you’re allowed to continue claiming joint filing status for a period after the spouse’s death.
- Some types of income qualify for favorable tax rates. Qualifying dividend income and long-term capital gains get taxed at lower rates than ordinary income. Depending on your income mix, your taxes might differ.
Despite those specific considerations, though, you can see that typical folks making $100,000 pay roughly 5% to 15% of their income to the IRS in taxes, with single filers bearing a much larger brunt. If that’s more than you want to pay, then you’ll need to look for smart tax breaks to cut your bill to Uncle Sam.