Tax Brackets and How They Affect Your Income
Taxes can be a complicated subject, but it is not something that should keep you up at night. Taxes are a necessary part of citizenship. It is used to help fund the government and the programs that the government determines are necessary. Tax brackets are used to determine the amount of tax you owe each year.
What is a Tax Bracket?
A tax bracket is a range of income on which a certain percentage of taxes is applied. They are determined by the country’s tax laws and vary from country to country. In the United States the amount owed for each tax bracket alters from time to time due to changes that congress makes in the tax laws.
In the United States, there are seven brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
The United States tax brackets are progressive taxes that are imposed on income. There are seven different brackets in the US tax system, and each bracket has a different rate of taxation. These percentage amounts are assessed based upon level of income. The basic idea behind the US tax system is that as one earns more money, they will be taxed more.
How Tax Brackets Work and How They Affect Your Taxes
Tax brackets are used to divide the tax base into different parts and then apply a different rate of tax on each part. The tax brackets are set in place by law and then the Internal Revenue Service oversees the management of the payments that come in. They verify verify that each return that is filed is accurately calculating the correct tax based upon the current bracket laws that have been set.
Many think that those who make the most money do not pay their fair share. However, the tax bracket ensures that those who make the most money pay the highest percentages in tax.
Most corporations deduct tax withholdings from their employees paychecks. This reduces the amount of income the employee brings home each month. However, it also reduces the amount owed to the federal, state, and often, local governments. Thus, when you file your tax return you are less likely to owe any amount, and may get a refund from the government if you overpayed your tax.
If you overpay each year and would like to see more income in your monthly paycheck, you can change your W-4 form to more accurately reflect your tax situation and submit it to your employer. This can decrease the amount withheld from your paycheck giving you more each month. But, your refund during tax season may be decreased.
How to Calculate Your Income Tax Bracket and Find the Best One for You
Your tax bracket depends on your circumstances and how much money you make.
To calculate your bracket, you need to know your adjusted gross income (agi) and your filing status. The filing status can be single, head of household, married filing separately or jointly.
Once you know both your AGI and your status you can estimate the amount of tax you will pay for the year.
Current Individual Tax Bracket Levels
1) 10% on income up to $10,275
2) 12% on income between $10,276 and $41,775
3) 22% on income between $41,776 and $89,075
4) 24% on income between $89,076 and $170,050
5) 32% on income between $170,051 and $215,950
6) 35% on income between $215,951and $539,900
7) 37% for any amount $539,901 or more
Current Complete Tax Brackets
| Tax rate | Single filers | Married filing jointly | Married filing separately | Head of household |
|---|---|---|---|---|
| 10% | $0 – $10,275 | $0 – $20,550 | $0 – $10,275 | $0 – $14,650 |
| 12% | $10,276 – $41,775 | $20,551 – $83,550 | $10,276 – $41,775 | $14,651 – $55,900 |
| 22% | $41,776 – $89,075 | $83,550 – $178,150 | $41,776 – $89,075 | $55,001 – $89,050 |
| 24% | $89,076 – $170,050 | $178,151 – $340,100 | $89,076 – $170,050 | $89,051 – $170,050 |
| 32% | $170,051 – $215,950 | $340,101 – $431,900 | $170,051 – $215,950 | $170,051 – $215,950 |
| 35% | $215,951 – $539,900 | $431,901 – $647,850 | $215,951 – $323,925 | $215,951 – $539,900 |
| 37% | $539,901 or more | $647,851 or more | $323,926 or more | $539,901 or more |
Of course, at Cowdery Tax we can assist you in determining your tax bracket and help you to file your tax return on time. Be sure to read this article on how to stay tax prepared through the year so you’re ready when tax season arrives.
This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.
