How To Understand Income Tax Brackets

They say that there are only two things certain in this world and these are death and taxes. There is little room for argument in the statement. Throughout the course of history, kingdoms have transitioned; states were made and divided, united and divided again. But the fact remains that each of these formations required one thing from their citizens: Taxes. Taxes were and always will be part of the three inherent powers (police power, eminent domain and taxation) of states around the globe. Taxation systems have evolved with the times. Gone are the days when a harsh and cruel king could grab land and produce unlimitedly. Now, there are limitations and written laws regarding every form of taxation from business tax to income tax. It cannot be denied that economies are made or broken by taxes and how the people in the government use them.   

In the United States, there are numerous ways in which taxes are distributed. There is state tax that can vary in range depending on the state where you live in and there's federal tax. It would not be fair to tax individuals only, so there is a corporation tax for business establishments. Since there are so many tax laws and forms of taxes, sometimes payers are left confused with how taxes are computed. For this, you need to be armed with a little know how and of course, to complete the equation, a calculator. There are different forms of taxes, meaning there are varying rates as to your status. There's single, married filing separately, married filing jointly and head of the household. So if you are single, you have different taxable ranges than another individual who falls under the category of head of the household. Here's information for your reference.

1. Single:

  • 10% Interest Rate - 0-8,350
  • 15% Interest Rate - 8,350-33,950
  • 25% Interest Rate - 33,950-82,250
  • 28% Interest Rate - 82,250-171,550
  • 33% Interest Rate - 171,550-372,950
  • 35% Interest Rate - 372,950-upward

2. Married filing separately

  • 10% Interest Rate - 0-8,350
  • 15% Interest Rate - 8,350-33,950
  • 25% Interest Rate - 33,950-68,525
  • 28% Interest Rate - 68,525-104,425
  • 33% Interest Rate - 104,425-186,475
  • 35% Interest Rate - 186,475-upward

3. Married filing jointly

  • 10% Interest Rate - 0-16,700
  • 15% Interest Rate - 16,700-67,900
  • 25% Interest Rate - 67,900-137,050
  • 28% Interest Rate - 137,050-208,850
  • 33% Interest Rate - 208,850-372,950
  • 35% Interest Rate - 372,950-upward

4. Head of household

  • 10% Interest Rate - 0-11,950
  • 15% Interest Rate - 11,950-45,500
  • 25% Interest Rate - 45,500-117,450
  • 28% Interest Rate - 117,450-190,200
  • 33% Interest Rate - 190,200-372,950
  • 35% Interest Rate - 372,950-upward

You can hire a bookkeeper, an assistant, estimator, etc. But it would be good to know how to do this on your own. So here's how. For example: You have a net income of 80,000 and you are still single. You follow these steps:

            8,350 - 0 x 10% =                835

            33,950 - 8,350 x 15% =     3,840

            80,000 - 33,950 x 25% = 11,512.50

***Note: Net income is gross income minus deductions and tax exemptions.

Then you add the answers to each of the three computations. In this example, your total tax would be 16,187.50. It is really quite simple once you understand the logic that goes into it. But sometimes computations and results are way off the correct amount. That's when an income tax refund comes in. This is good in some cases but then it has its downsides. So if you want to be certain about your taxes, get yourself armed with a little knowledge and a calculator.


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