US Federal Income Tax Overview
The US federal tax system uses seven progressive tax brackets for 2024–2025 (10% to 37%). Different income portions are taxed at different rates—not your entire income at your top bracket rate. The standard deduction ($14,600 single, $29,200 married filing jointly, $21,900 head of household) is subtracted from gross income before calculating tax liability.
How Tax Estimates Work
Taxable income = gross income minus standard deduction. For example: A single filer earning $75,000 with the $14,600 deduction has $60,400 taxable income. They pay 10% on the first $11,600, 12% on $11,601–$47,150, and 22% only on $47,151–$60,400. Tax credits (Child Tax Credit: $2,000/child, EITC, education credits) reduce tax dollar-for-dollar.
Mortgage Payment Basics
Monthly mortgage payments include PITI: Principal (loan paydown), Interest (lender charge), Taxes (property tax, collected via escrow), Insurance (homeowners, required by lenders). Early payments go mostly to interest. Over time, more goes to principal. Use our calculator to estimate total costs for 15-year vs 30-year loans.
Loan Terms Comparison
30-year mortgage: Lower monthly payments, more total interest. 15-year mortgage: Higher payments, dramatically less interest. Example: $300,000 at 6.5% = ~$1,896/month (30-year, $382,000 total interest) vs ~$2,613/month (15-year, $170,000 total interest). Down payment 20%+ avoids PMI (0.5–1% of loan amount annually).
Regional Property Tax Differences
Property taxes vary by state: New Jersey/Illinois exceed 2% annually, while Hawaii/Alabama stay below 0.5%. Lenders collect 1/12 of annual taxes monthly via escrow. Homeowners insurance costs depend on location, home value, and disaster risk (hurricanes, earthquakes, floods require additional coverage).
Using These Online Calculators
Tax calculator: Estimate federal tax liability for employees or self-employed income. Adjust W-4 withholding to avoid large refunds (interest-free loan to IRS) or underpayment penalties. Self-employed must make quarterly estimated payments.
Mortgage calculator: Estimate monthly payments before talking to lenders. Financial experts recommend housing costs under 28% of gross monthly income, total debt under 36% (the 28/36 rule). Budget 1–2% of home value annually for maintenance.
Tax Deductions for Homeowners
Mortgage interest deductible up to $750,000 loan amount (must itemize). Property taxes deductible up to $10,000 when itemizing. Due to higher standard deductions (2024–2025), many homeowners don't itemize. Use the tax calculator to compare itemizing vs standard deduction for your situation.