Taxes: It’s All About the Mindset
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What comes to mind when you hear the word taxes?
Pause for a moment and answer that honestly before reading on.
Maybe you think of the tax withheld from your paycheck or the annual inconvenience of filing a return. Perhaps you think about last year’s tax bill or refund. Or maybe you quickly change the subject in your mind to avoid thinking about them altogether.
Whether you realize it or not, you have a mindset around taxes, and that mindset impacts your financial well-being. Sadly, many people adopt skewed tax narratives that lead to unnecessary tax bills or missed opportunities.
You do not get to choose whether taxes exist. But you do get to choose how you think about them and plan for them.
Here are three principles for developing a healthy mindset around taxes:
First, pay your taxes joyfully, because taxes are symptomatic of God’s provision. Deuteronomy 8:18 reminds us that our ability to earn income is itself a gift: “You shall remember the Lord your God, for it is he who gives you power to get wealth.”
Second, keep taxes in the future tense, not the past tense. Thoughtful planning ahead of time can help you avoid unnecessary surprises, penalties, and missed opportunities.
Finally, remember that while taxes are a key player in your finances, they should not have the final say. Your values should. Most financial decisions involve tax implications, but in areas of investment or generosity, taxes are often a second or third-level consideration. That’s why some of our generous clients give away more than they can deduct on their tax return.
With that mindset in place, let’s walk through some basics that will help equip you to navigate your taxes.
Understanding Your Taxes
Why do we pay taxes?
Taxes help fund the basic structures of society: roads, defense, public services, and more. Policies and rates may change over time, but taxes remain part of how civil society functions.
Broadly speaking, there are three primary tax buckets: taxes on what you earn, what you buy, and what you own. Understanding each bucket can help you make sure there are no leaks in your tax strategy.
Income Taxes
The first and most familiar category is income tax, which applies to money you earn throughout the year.
Income includes wages, bonuses, freelance income, or investment income. You pay income taxes at the federal level and, depending on where you live, the state and sometimes local levels as well.
Federal income taxes are graduated, meaning your income is taxed in layers rather than at one flat rate. For example, if you are a single tax filer in 2026 earning $60,000, the first $12,400 will be taxed at 10%, the next $38,000 will be taxed at 12%, and only the amount above that will be taxed at 22%.
2025 Federal Income Tax Brackets
Tax Rate | Single Filers | Married Couples Filing Jointly |
|---|---|---|
| 10% | $12,400 or less | $24,800 or less |
| 12% | $12,401 to $50,400 | $24,801 to $100,800 |
| 22% | $50,401 to $105,700 | $100,801 to $211,400 |
| 24% | $105,701 to $201,775 | $211,401 to $403,550 |
| 32% | $201,776 to $256,225 | $403,551 to $512,450 |
| 35% | $256,226 to $640,600 | $512,451 to $768,700 |
| 37% | Over $640,600 | Over $768,700 |
Understanding income taxes can keep you from overextending yourself financially. A good rule of thumb is that after taxes and employer benefits are deducted, at least one-third of your income never makes it to your bank account. It’s critical to create your spending plan based on your take-home pay, not your gross salary.
Payroll Taxes
Closely related to income taxes are payroll taxes, commonly known as FICA, which fund Social Security and Medicare. Workers owe payroll taxes on their wages or self-employment income.
In 2026, employees pay 6.2% for Social Security on wages up to $184,500, plus 1.45% for Medicare, while employers match those amounts.
Self-employed individuals pay both halves for a total of 15.3%, but they can usually deduct part of that self-employment tax elsewhere on the return.
Investment Taxes
Another important category of taxes relates to your investments, which generate taxes in two main ways: through gains and through income.
When you sell an investment for more than you paid, you realize a capital gain. If the asset was held for one year or less, that gain is taxed at ordinary income tax rates, the same brackets used for income taxes (see above). If it was held for more than one year, it generally qualifies for more desirable long-term capital gains treatment.
Most people pay a 15% tax for long-term capital gains, but depending on your income, you may pay 0% or 20%. Keep in mind that certain investments, like art and collectibles, have their own unique tax brackets as well.
2026 Long-Term Capital Gains Tax Brackets (Projected)
Tax Rate | Single Filers (Taxable Income) | Married Filing Jointly (Taxable Income) |
|---|---|---|
| 0% | $0 to $49,450 | $0 to $98,900 |
| 15% | $49,451 to $545,500 | $98,901 to $613,700 |
| 20% | $545,501 or more | $613,701 or more |
Your investments may also produce dividends and interest, both of which can create tax liability. While most investment income is taxed at ordinary income rates, qualified dividends are taxed at long-term capital gains rates.
Investment income and capital gains in tax-deferred accounts, such as IRAs and 401(k)s, are not taxed each year while they remain in the account. Instead, taxes are deferred until funds are withdrawn.
If you expect significant investment income or capital gains during the year, it may be wise to revisit your withholding or estimated tax payments before the bill shows up.
Property Taxes
In addition to investments, many people own physical assets that can create tax liability. Property taxes commonly apply to real estate, and in some places, they can also apply to vehicles or other personal property.
If you have a mortgage, your monthly payment may include your property taxes. If not, you’ll receive a bill that will need to be paid separately. Owning a vehicle may also require annual tax payments, which can easily be overlooked.
Setting aside money monthly into a “tax savings” account can make those larger payments easier to manage.
Sales Taxes
Finally, some taxes are tied not to what you earn or own, but to what you purchase.
Most people encounter this through sales tax, which applies in many states and can range from around 3% to almost 10%. Sales tax is often the culprit when you see an item listed at one price, only to pay more at the register.
In some cases, specific purchases also carry excise taxes. The government imposes excise taxes on products like tobacco to discourage unhealthy habits and gasoline to help fund highway infrastructure.
Even though these taxes usually do not require extra reporting on your annual return, they still affect your cost of living and should be accounted for in your monthly planning.
Paying Your Taxes
These five categories describe how taxes arise, but it’s also important to understand how they are paid throughout the year.
Most employees pay taxes throughout the year through payroll withholding based on Form W-4. That form should not be a one-time exercise. Marriage, children, a side job, a spouse returning to work, or a large jump in income can all make an old W-4 outdated.
If you receive income without taxes being withheld, such as freelance work, self-employment income, rental income, interest, dividends, or sizable investment gains, you may need to increase your payroll withholding or make estimated tax payments during the year.
A qualified CPA can help determine the appropriate timing and amounts for those quarterly payments.
Filing Your Taxes
Proactive planning and accurate filing are both essential parts of a healthy tax strategy. Here are a few practical steps to help make the filing process smoother.
First, don’t wait until the last minute. Rushing increases the likelihood of mistakes. At the same time, don’t file too early, before all your tax documents arrive.
Common tax reporting forms include:
- W-2 (wages from an employer)
- 1099-NEC or 1099-MISC (contract income)
- 1099-INT and 1099-DIV (interest and dividends)
- 1099-B (investment sales)
- 1099-R (retirement distributions)
- 1098 (mortgage interest)
- K-1 (business or partnership income)
Second, be sure to claim any deductions and tax credits you qualify for. Deductions reduce the amount of income subject to tax, while credits reduce your tax bill dollar-for-dollar. Both can make a meaningful difference, so it’s important not to overlook them.
IRS.gov provides a comprehensive list of deductions, including retirement contributions, HSA contributions, student loan interest, mortgage interest, and charitable giving. Some deductions are only available if you itemize instead of taking the standard deduction.
Studying this list and consulting with a CPA can help you identify deduction and credit opportunities ahead of time.
Third, understand the complexity of your tax situation. For straightforward returns, reputable tax software may be sufficient. However, if you have a more complex tax picture or want help planning for future tax opportunities, working with a qualified CPA is often the better choice.
Taxes and Stewardship
As you complete your 2025 tax return, seize the opportunity to evaluate your current perspective and strategy.
First, look backward. Did you receive a large refund or have to write a significant check? If so, it may be time to reevaluate your withholding, adjust estimated payments, or seek professional guidance.
Then, look forward. What deductions or credits might you qualify for next year? Could you accelerate deductions into a higher-income year, or delay an income-producing event into a year when you expect to be in a lower tax bracket?
Finally, look inward. What are your current tax narratives? Begin cultivating a healthier perspective that allows you to hold your taxes lightly, pay them joyfully, and plan for them proactively.
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