Why Income Taxes Feel So Overwhelming
Let’s take a step back and look at how income tax is structured and where your tax dollars actually go.
If taxes feel confusing, that’s because they are by design—but the core concepts are actually pretty simple. Understanding how income tax works won’t just help you during tax season—it can also help you plan ahead, make smarter financial decisions, and (hopefully) feel a little less frustrated when you see money taken from your paycheck.
What Is Income Tax (and Where Does It Go)?
Income tax is just one of many taxes we pay. It’s a percentage of your earned income (like wages, salary, or freelance work), and it funds things like:
Public schools and infrastructure
Social programs (Medicaid, SNAP, etc.)
National defense
Government operations
But income tax is not the same as:
Social Security & Medicare taxes (which are deducted separately from your paycheck)
Sales tax (which varies by state and applies when you buy something)
Property tax (which homeowners pay)
Who Gets Your Income Tax?
Fun fact: We don’t just pay income tax to one place.
The federal government (IRS) takes its share.
Most states also collect state income tax.
Some cities and counties add a local income tax.
Each of these is handled separately, which is why you might owe state taxes even if you’re getting a federal refund.
How the Tax Bracket System Actually Works
A big myth about income tax is that moving into a higher bracket means all of your income is taxed at a higher rate. Not true!
The U.S. has a progressive tax system, meaning:
Your first chunk of income is taxed at the lowest rate.
Only the portion of your income that falls into higher brackets gets taxed at those higher rates.
For example, if you earn $50,000, it’s taxed in tiers—not at one flat rate.
What Income Is (and Isn’t) Taxed?
Not everything you earn is taxable. Some common deductions lower your taxable income before the IRS calculates what you owe, including:
Retirement contributions (401(k), IRA)
Student loan interest
Health Savings Account (HSA) contributions
And then there are tax credits—which directly reduce your tax bill dollar-for-dollar, like:
The Child Tax Credit (for parents)
These don’t just lower your taxable income—they lower what you actually owe.
Why This Matters
Understanding how income taxes work isn’t just about filing once a year. It’s about knowing how much to set aside, what’s deducted from your paycheck, and how to make sure you’re not overpaying or underpaying throughout the year.
If this still feels like a black box, you’re not alone! Emily (hello@financesforfeminists.com) and let me know—what’s one thing about taxes that still feels confusing?
