How to Understand U.S. Tax Brackets
Tax brackets change from time to time based on factors ranging from the beliefs and political party of the current president to the state of the national economy. The key to understanding U.S. tax brackets is knowing how the percentages are applied to your income.
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Instructions
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Find your tax bracket. U.S. tax brackets range from 10 to 35 percent, but these brackets are subject to change and vary based on how you are filing your taxes (i.e., Married Filing Jointly, Single, Head of Household, Married Filing Separately) and your income. Visit the Internal Revenue Service website to find the tax bracket that applies to you.
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Know the upper and lower limits of your tax bracket. The IRS website includes a table that reflects the upper and lower income limits for all U.S. tax brackets and for all filing categories.
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Comprehend how tax brackets are used when calculating taxes. First, find you actual tax bracket, then find the next lower bracket. The income you have earned, up to the upper limit of the lower tax bracket will be taxed at that bracket's rate. The income you earn beyond that will be taxed at the rate of your actual tax bracket.
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Understand how taxes on your income are calculated. Here's an example: You are single and your income for the year was $25,000 so you fall into the 15 percent tax bracket. The first $7,550 is taxed at the 10 percent rate of the next lower tax bracket, and anything over $7,550 ($17,450 in this case) is taxed at the 15 percent rate of your actual tax bracket.
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Recognize that income taxes for all tax brackets are calculated this way. You will be taxed at the lower rate first, up to the lower tax bracket's maximum income amount.
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Tips & Warnings
Find the tax savings. Married Filing Jointly and Head of Household have a higher income limit for its lowest tax brackets. If you are married and your household income was $10,000, you are taxed at the lowest tax rate by filing "Jointly." You are taxed at a higher rate if you file "Separately" with the same income.
Always check with the IRS. Tax brackets are subject to change and they do. Sometimes they change from year to year or every couple of years. Be sure to check with the IRS to find your current tax bracket before filing your taxes or you could be hit with a hefty tax bill or penalties and fees.
