Now that you have calculated your federal tax bill, you can move on to calculating your state tax bill. Since I live in the state of Ohio, my example is going to use Ohio tax taw. You’ll need to reference your own state’s tax laws to be able to do this.
Begin with your Federal AGI
In my previous post about federal taxes, we calculated my Adjusted Gross Income, which is needed to begin your state taxes. My AGI was $46,487. The next step would be to calculate my Ohio AGI by subtracting any deductions I qualify for. I don’t actually qualify for any deductions, but the different deductions are listed here in the Ohio Schedule A form. My sense is that most millennials are not going to be deducting much. If you use a tax software they will take you through the questions needed to find out. Medical expenses and contributions to an 529 college account would be the common deductions.
My Ohio AGI is also $46,487. My next step is to subtract off the value for my personal exemption which, according to this table, is $2,050.
Identify your Ohio tax bracket and calculate
My Ohio taxable income is $44,437 so I will use this number to calculate my taxes owed to the state of Ohio. I will use a tax bracket table very similar to the Federal tax bracket tables. I look at the table below and find I am in row 5.
For taxable years beginning in 2017:
|Ohio Taxable Income||Tax Calculation|
|0 – $10,650||0.000%|
|$10,651 – $16,000||$79.08 + 1.980% of excess over $10,650|
|$16,000 – $21,350||$185.01 + 2.476% of excess over $16,000|
|$21,350 – $42,650||$317.48 + 2.969% of excess over $21,350|
|$42,650 – $85,300||$949.88 + 3.465% of excess over $42,650|
|$85,300 – $106,650||$2,427.70 + 3.960% of excess over $85,300|
|$106,650 – $213,350||$3,273.16 + 4.597% of excess over $106,650|
|More than $213,350||$8,178.16 + 4.997% of excess over $213,350|
I need to take $44,437 and find the excess over $42,650 and calculate the taxes owed.
Just like in federal taxes, the Ohio government likes whole numbers and there is some rounding throughout the calculation. My actual state tax owed this year was $1011. Since I paid in $1262 throughout the year in paycheck with holdings, I am owed a refund.
My refund is $251 this year. As soon as I receive this in my checking account, I will transfer it to my Roth IRA and invest it for my future retirement.
Remember that the point of calculating your own taxes is so that you can start predicting taxes for different situations. If I save a certain amount more in retirement, how will that affect my tax bill? What plans can I make for the refund I should receive?