Taxes 101 Taxes 101:Tax Brackets Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by Elle Martinez Published Dec 21, 2009 - [Updated Jul 11, 2019] 2 min read Some people dread tax because they worry about paying too much or not paying enough. Learning more about tax basics can help you make informed decision and minimize your tax burdens. A topic many people have questions about is tax brackets and how they work. What Are Tax Brackets Here in the United states, we have a progressive tax system. As you earn more money, you have a higher tax rate. The amounts within the tax brackets are adjusted for inflation every year. Congress establishes the tax rates and right now the tax brackets are from 10%-35%. Some people believe that tax brackets only apply to your income from an employer. That’s not true, it includes income from different sources. Tax brackets are based on your taxable income, which can be very different from your gross income, depending on your deductions and personal exemptions. When you fill out your W-4, try to make it as accurate as possible so your withdrawals can cover your tax obligations. How Tax Brackets Work Some people think if they get a raise at a job or earn enough money that puts them in the next tax bracket, they’ll see a huge increase on their taxes. That’s not the case. Your income is not completely taxed at the new tax bracket you fall in. The additional income from a raise will be taxed at the new rate. We’ll us an example to explain how the tax brackets work. Suppose you’re filing single and have a total of $39,000 in taxable income for 2009. Here’s how your taxes are calculated with the brackets: Your first $8350 will be taxed at 10%. From there, from $8351 to $33,950 of your taxable income will be taxed at 15%. The rest of your income ($5,050) will be taxed at 25%. So even though you fall into the 25% tax bracket, you’re not paying 25% on all of your taxable income. You will be effectively taxed at a lower rate. Previous Post Tax Filing Status Next Post Taxes 101: Employee Stock Purchase Programs Written by Elle Martinez Elle helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second. More from Elle Martinez Visit the website of Elle Martinez. Follow Elle Martinez on Facebook. Follow Elle Martinez on Twitter. One response to “Taxes 101:Tax Brackets” hi me and wife had total income of $92410.00 of witch $42960,00 was social security for 2018.how do they compute our tax bracket if we have standard deduction of $25600,im over 65 wife is not..ty Reply Leave a ReplyCancel reply Browse Related Articles Tax Planning TurboTax Enables Refund Advance to Taxpayers Investments Tax Benefits of Real Estate Investing Self-Employed Business Tax Checklist: What You’ll Need When Filing Uncategorized What Is Deferred Compensation & How Is It Taxed? Investments How Does an Inherited IRA Work? Work Choosing Your Business Structure: 5 Types of Businesses… Tax Deductions and Credits Are HOA Fees Tax Deductible? What You Need to Know Crypto Understanding Crypto and Capital Gains Work 7 Things You Need to Know About the New Business Report… Work Using Form 8829 to Write-Off Business Use of Your Home
hi me and wife had total income of $92410.00 of witch $42960,00 was social security for 2018.how do they compute our tax bracket if we have standard deduction of $25600,im over 65 wife is not..ty Reply