{"id":13792,"date":"2022-09-06T12:53:24","date_gmt":"2022-09-06T17:53:24","guid":{"rendered":"https:\/\/www.fitbux.com\/articles\/?p=13792"},"modified":"2022-09-10T14:55:33","modified_gmt":"2022-09-10T19:55:33","slug":"taxes-explained","status":"publish","type":"post","link":"https:\/\/www.fitbux.com\/articles\/taxes-explained\/","title":{"rendered":"Taxes Explained: 9 Must know Items So You Can Save"},"content":{"rendered":"

Attempting to read the entire tax code is one of the most boring things you can do. Trust me, I\u2019ve tried.\u00a0 However, in this article, I\u2019m going to explain nine items you need to know about taxes.<\/p>\n

These items will help you understand how the tax system works and how to minimize your tax bill.\u00a0 This is extremely important because taxes are the largest expense most of us will have to cover during our lifetimes.<\/strong><\/p>\n

Before we get started, here is a general disclaimer: This article is not tax advice.\u00a0 The author nor FitBUX<\/a> is a licensed tax advisor. We highly recommend consulting a licensed tax advisor with any personal tax questions you may have.<\/p>\n

Overview: How Do Taxes Work?<\/h2>\n

One thing you need to quickly realize is that not all money is treated equally when it comes to taxes!<\/p>\n

There are three basic types of taxes in America: Income tax, capital gains tax, and dividend tax.\u00a0 Each of these is taxed differently. More on this later.<\/p>\n

Most Americans are concerned about income taxes because the amount we make from capital gains and dividends<\/a> each year is relatively small.\u00a0 Most of our income comes from wages and salaries.\u00a0 This is especially true if you are just starting out on your financial journey.<\/p>\n

Wealthy people, i.e. those millionaires and billionaires you hear of all the time, are primarily concerned about capital gains and dividend taxes.\u00a0 Thus, when you hear a politician saying something like, \u201cI\u2019m only going to raise income taxes on people making $400,000 or more per year,\u201d it’s really just a way to try and get\u00a0 votes from the people making up to $399,999\/year.<\/p>\n

In addition, extremely wealthy people such as Warren Buffett don\u2019t have high incomes as most of their money comes from capital gains and dividends. Don\u2019t worry, this will all make since soon so keep reading.<\/p>\n

History & How We Got Our Current Tax Code<\/h2>\n

Warning: This is not a political discussion. However, understanding how we got to\u00a0 the current tax code will give you more insight on how to use it to minimize your taxes.<\/p>\n

It could also start to influence how you vote in the future because you\u2019ll be able to understand what politicians are aiming for as well as plus understand how their actions affect you!<\/p>\n

Our current tax system was put into place in 1913 and is called a “progressive tax system”. Simply put, one a low income earner should pay less taxes, percentage-wise, than a high-income earner. The individual that often times is accredited with this system is Karl Marx and he wrote about it as one of his 10 planks in the Communist Manifesto<\/a>.<\/p>\n

The goal of the progressive tax system Marx advocated for was to reduce the ability of the individual to generate wealth.\u00a0 In short, it transfers wealth from the individual to the government for redistribution among society based on how government officials determine it should be distributed.<\/p>\n

To easily understand why, I turn to our 2 FitBUX Formulas:<\/p>\n