This form should be familiar. It's form 1040. Everybody files it every year with the IRS. What I'd like you to do is, if you have a quick second, grab your last 1040. Go to line 15. This is your taxable income. Write that down. Make a note of it. Go to line 24. That's your total tax. Take line 24. Divide it by line 15.
That's your effective tax rate for that particular year. Uh, say if you earned 100, 000 and you paid 20, 000, your total taxable income was 100, 000 and you paid 20, 000 in tax, your effective tax rate was 20%, you keep 80%. Remember that for later. It's an invaluable number to know when you're working on planning issues.
Next up, the five things you can do with income. There's only five things.