What Is My Tax Bracket?

Save
Next Video:
IRS 1099 Forms Instructions....5

When people refer to tax brackets, they are usually referring to marginal tax rates, which are the tax rates at which the last dollar of an individual's taxable income is taxed. Find out why the effective tax rate is lower than the marginal tax rate with information from an independent CPA in this free video on tax brackets.

Part of the Video Series: Tax Help
Promoted By Zergnet

Comments

Video Transcript

I'm Miranda Chook, a CPA. Now when people ask you what your tax bracket is, they usually mean what is your marginal tax rate and what that means is what is the tax rate at which the last dollar of your taxable income is taxed at. Let's walk through an example. Let's say you're filing single and your taxable income is 80,000 dollars for 2008. Now your first 8,000 dollars, 8,025 dollars of your taxable income is actually taxed at 10%. Then the next bracket is 8,025 to 32,550 and that's taxed at 15%. And then so on until the bracket that is at 78,851 to your 80,000 in our example which is taxed at 28%. So your tax bracket or your marginal tax rate is 28%. Now keep in mind that your effective tax rate is actually lower than your marginal tax rate. As you can by our example, not every dollar was taxed at that 28%. So to get your effective tax rate, take the amount of your taxes paid and divide it by your taxable income and that's your effective tax rate. Now your combined tax rate is the sum of your federal tax rate plus your state tax rate and remember to take advantage of the deduction that you can take on your federal return for your state taxes when you calculate your combined tax rate.

Featured

Related Searches

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!