Tax Basics: Tax Brackets and How They Work

 

Tax Brackets & How They Work

Hi there— Today we are going to briefly go over Tax Brackets. These recently have shifted due to new tax laws that have passed. By having an understanding of a tax bracket and how they work, you will be able to more accurately plan financially personally or for your business.    What is a Tax Bracket?  Tax Brackets are a result of the progressive tax system that our government uses. There are currently 7 Tax Brackets with tax rates. They fluctuate alongside income levels to determine the tax rate paid on each range of taxable income.     Why are these important?  Tax Brackets are important because they show you at what rate each portion of income will be taxed. By knowing what bracket you fall in, you are able to more accurately plan your financial journey by knowing what to expect to pay the IRS and what your income tax withholding amount is.     How do I know which tax bracket I fit into? The tax bracket is determined by the amount of taxable income the taxpayer has and their filing status.

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How much will my income be taxed?   Follow the link above and use the charts to find your income level on the chart that reflects your filing status. Here is an example of how it will be taxed:   If you are a taxpayer filing jointly and make $83,000 you would fall into the 22% tax bracket. Meaning that the first $19,900 of your income is taxed at 10%, income between $19,901 and $81,050 at 12%, and the remaining $1,950 at 22%.   Luckily, you don't have to remember all of this, that's why you have us! We just want to share what we can to help you better understand your taxes and what's happening.    We will be back soon with more Tax Basics emails!  Bye, Friends!

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