What's the most you got back in income tax?

As a teenager who just got his first paid internship, can someone explain income tax and federal tax? Are there ways to decrease tax?

• An income of $100,000 would be taxed $26,000 (federal) and $6,400 (California Tax). reference: (http://www.tax-brackets.org) Why is federal tax a full quarter of income? Update: My parents are immigrants and can't explain it very well, and the official tax websites are fairly difficult for introductory reading.

• Answer:

  Here is a VERY quick rundown of what taxes are like from an employee's point of view with regards to wages/salaries (which is what you probably want to know.)  I am making assumptions based on the information you gave me, but PLEASE do not take this as more than a general overview of taxes; this is NOT A SUBSTITUTE FOR TAX ADVICE.  ^_^  Tax comes in a lot of variations, so this is not the be-all and end-all of taxation, just what seems to possibly be relevant to you at this moment.  Please keep in mind that I am in Colorado, not California, so the state-tax portion I will not be able to explain well.  First of all, your status determines a lot of your taxation.  Whether or not you are a dependent of someone else is important.  You are usually your parents' dependent until the year you turn 19, or the year you turn 24 if you are a full-time student.  If you are a dependent, your standard deduction is limited to $1000 or your earned income plus $350.  There are actual definitions for these: Publication 17 ( http://www.irs.gov/pub/irs-pdf/p17.pdf ) is a great resource for looking up legal definitions. You should take a look at Form 1040 (don't get EZ: get Form 1040 without any letters behind it).  I won't make you work through the form, but Form 1040 provides a good structure for getting an introduction to how income tax works.  Notice how it starts with income, then moves on to adjustments to income, and then gets into deductions and taxable income?  That's pretty much how your income is calculated: first, add up everything you've received from all sources, and then take out allowed pre-tax deductions to arrive at AGI (adjusted gross income).  From there you get a standard deduction (or itemized deduction; you can only choose one) and a personal exemption (not if you are a dependent though).  The published tax brackets people talk about (10%, 15%, etc) are applied to your taxable income (you arrive at that number on page 2 of Form 1040.)  For a married couple with no children, the 2013 standard deduction and the 2013 personal exemptions will come to exactly $20,000.  If that couple made the $100,000 you mentioned as an example in your question, then assuming they had no other income and no pre-tax adjustments, their AGI would be $100,000 and their taxable income would be $80,000.  The USA operates on a progressive system of taxation, so the more money you make, the higher your tax bracket.  Tax brackets will differ based on your marital status (single/married), your filing status (joint, single, married-filing-separate, head-of-household, widower, etc--Pub 17 has the definitions.)  The tax brackets are kind of like "buckets", if you will.  First, you fill the 10% bucket and everything in there is taxed at 10%.  Then you fill the 15% with the remainder until that bucket is full, and it's taxed at 15%. It's kind of like how your water bill, electricity bill, or even your gas bill has tiers of charges.  The more electricity you use, the higher your rates, and when you use a LOT of electricity and you get bumped into a higher tier, they charge you more for the electricity you use in that tier.  (Just as an example--your utility company may be different.  Go borrow the latest utility bill from your parents and see if it works out like that?) Let's go back to tax and work on an example.  Say this couple has $80,000 in taxable income.  (Go look up a tax bracket table for 2013.  They change every year; I'm using http://www.bankrate.com/finance/taxes/tax-brackets.aspx.)  The first $17,850 of their income will be taxed 10%.  The next $54,650 will be taxed 15%.  The last $7500 will be taxed $25%.  The math to figure out their tax works out like this: $17,850 x 10% = $1785.00 $54,650 x 15% = $8197.50 $7,500 x 25% = $1875.00 ------------------------------------------------------ $80,000 x __% = $11857.50 As you can probably tell if you do the math, that blank there isn't 25%.  In this case, the effective tax rate of the couple making $100,000 ultimately works out to 11.86%.  That is just the federal income tax.  There is also employment tax (also known as payroll tax), levied on your entire income.  Employment tax is 12.4% for Social Security, and 2.9% for Medicare, for a whopping 15.3%... BUT WAIT!  If you are employed by someone else (in other words, if you are NOT self-employed), then half of that (7.65% of your salary) is the responsibility of your employer, not you.  In the example of the couple making $100,000, they will pay $7650 in employment tax (taken out of their paychecks) and their employer will pay $7650. I live in Colorado, so the Colorado state income tax is a flat 4.63% of your taxable income as reported on your federal income tax return (with some adjustments--the CO income tax form is 3 pages long and has some adjustments that don't apply on the federal level.)  A quick Google search tells me that California also has a progressive tax system that works exactly like the federal system (only with different numbers.)  I don't have any experience with the CA tax system, but I am sure that with a bit of research you can probably figure it out.  This was a VERY general overview and does not take into account things like capital gains, itemized deductions, phaseouts, AMT, and other such things--that's something you should talk to a tax accountant about or do some research on after you get comfortable with the basics of taxation!  ^_^ ETA: If you actually want to know _WHY_ the tax brackets are where they are (why 10%, why 25%, why on the first $18+k, and other such questions), many books have been written on tax policy.  Or, if you want to get it straight from the horse's mouth, the legislative history on this is lengthy and has fueled many a dissertation at the BA, MS, and PhD level.