Comments on: What Are Tax Brackets?

By: bob

bob — Fri, 08 Mar 2013 21:26:03 +0000

i am 71 yrs old and married. should i take a co. buyout of 160000 if my debts are 80000

By: Henrik

Henrik — Tue, 29 Mar 2011 19:03:01 +0000

I’ve paid $16,000 in taxes and my tax return shows I still owe $2,000 on a 60K salary? According to the tax bracket I fall in, I should only be owing $11,000 and not $7,000 more than that!

——

This is a bit confusing for my situation.

Im on a $60,000 salary, so based on the bracket I fall in, this is my calculation:

$4,681 plus 25% of the amount over $34,000

$4,681 + $6,500 = $11,181

* I have earned $60,000 (before tax) in 2010.

* 26% of that was withheld in total (which is about $16K), as shown on my W-2

* Now TurboTax shows that I owe NY State $1886 more

* This brings me to paying up to $18K in taxes — around 30% of my income.

Is this normal or am I being overtaxed? Please help!

By: PT

PT — Fri, 03 Dec 2010 05:11:14 +0000

Great points, Joe. For planning purposes, the marginal is the way to go. But for fun, I like the effective. It’s cool to know what % you actually paid. But I agree that it’s not an actionable number. I do see a bit of value in comparing effective rates from year to year though.

By: JoeTaxpayer

JoeTaxpayer — Thu, 02 Dec 2010 23:40:22 +0000

PT – excellent overview on a sometimes complex topic. I tend to focus strongly on that marginal rate, as it drives many investing decisions. Roth vs Traditional (for either 401(k) or IRA.) What does my mortgage really cost me? Donate in December or January?

That effective (average) rate holds no interest for me as it’s really a distraction. Just like my 6 hour car ride from Boston to NYC tells you nothing. 6 hrs of slow traffic vs a 4 hr ride and long stop on the way for lunch.

The single making $90K will have taxable income in the 25% bracket after exemption/deductions, but in a good year or after a raise is back up into that next bracket.