How do I determine if I'm getting a 5% interest rate at a bank? What is my true amount of investment income? - Well, if you take that 5% and multiply it by one minus your tax rate (e.g., 100 minus 25 if you're in a 25 percent bracket), that would be 75. So, if you divide the 5% by 75%, it means you get about three and three-quarters percent after-tax income. - Is that good or bad? Can I get a tax-free investment that pays more than that? - Is a tax-free investment comparable to a taxable investment if I'm getting 6% on my CD at the bank? - Wow! How do I figure it out if I'm getting a tax-free rate of 5%? - You can't do it in reverse. Take the tax-free amount of 5% and divide it by one minus your tax bracket. It will come out to a little over six and a quarter percent. - So, if you're getting six percent on a CD and you're getting six and a quarter percent equivalent tax-exempt, the tax-exempt investment at five percent is a better investment. - This calculation is specifically for investments and compares tax-free investments to taxable investments. - Now, how do I figure it out for my income? - Add up all your income on page one of your 1040 form. - Subtract all of your deductions and taxes. - This will give you your net income, which is the amount available for you to buy food and pay for other household expenses.
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Video instructions and help with filling out and completing Can Form 1120 Schedule M 3 Withholding
