If you earn money in the United States, chances are that some of that money will be subject to federal income tax rates. 2014, like every year, brings changes to those rates. While Congress can always change the law, the Internal Revenue Service does a great job of publishing the updated federal income tax rates. 2014 numbers, current as of Dec. 10, 2013, appear below.
"Line 5" in the above chart refers to your taxable income, which is your income after any deductions and exemptions that you are entitled to claim.
Of course, not much is simple in the world of taxes. These tax rates, which are in addition to the Social Security and Medicare taxes that are withheld from your paycheck, apply to ordinary income you may earn. Long-term capital gains and dividends are taxed at different rates, an additional Medicare tax of 0.9% now applies to high earners, as does an additional 3.8% net investment income tax.
What you need to do about it
If you've got a decent salary, chances are good that some of your income will be subject to these federal income tax rates. 2014 taxes, like in most years, will need to be paid through withholding from your paycheck or through the quarterly estimated tax process.
Chances are, you don't yet know exactly what your 2014 income or tax burden will be. While you may be subject to penalties if you underpay your estimated taxes by too much, the Internal Revenue Service lets you estimate and get close. The key is to pay enough through timely estimated tax payments or payroll withholdings to be covered by a safe harbor provision. That way, you won't owe penalties if you pay your remaining 2014 income tax due by its anticipated due date of April 15, 2015.
Chuck Saletta is a Motley Fool contributor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
First Horizon National (FHN) Q4 2017 Earnings Conference Call Transcript
FHN earnings call for the period ending December 31, 2017.
Celgene's $9 Billion Buyout of Juno: Is It a Good Deal for Investors?
The price tag is actually higher than you think. But the payoff might be, too.
Bitcoin Plunges 9% as South Korea Prepares a Cryptocurrency Tax
All of the top digital currencies are in the red to start the week.