Tax Bracket Clarification
Oct. 17th, 2008 11:45 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
chargirlgeniusSeems a lot of people don’t understand how tax brackets work. I completely understand. I didn’t understand until I researched it about 6 months ago. I’m reposting something that I just posted elsewhere, thought it was worth pointing out:
Here’s how tax brackets work.
2008 tax brackets:
$0 - $15,650: 10% of the amount over $0
$15,651 - $63,700: $1,565 plus 15% of the amount over $15,650
$63,701 - $128,500: $8,772.50 plus 25% of the amount over $63,700
$128,501 - $195,850: $24,972.50 plus 28% of the amount over $128,500
$195,851 - $349,700: $43,830.50 plus 33% of the amount over $195,850
$349,701 - No limit: $94,601 plus 35% of the amount over $349,700
What does this mean? This means that if I make more than the next guy, I’m not being taxed more on the same amount of money. I’m only being taxed more on the amount that I make above and beyond him. If Joe the bus driver and his wife make $63,700, and my hubby and I make $100k, we’re paying the exact same tax rate on that $63,700. I’m only paying a higher percentage on the last $36,300 of my income. That’s not even taking into account the fact that I can likely hire a better accountant with that additional income.
I’ll admit, I haven’t delved into the details of the small business changes, but I’m not a small business owner. But if it works out the same as regular tax brackets, the person making $251k will still be taxed exactly the same percentage on the first $250k of that. Only the 1k over and above 250k will be taxed an additional 3%.
Google how tax brackets work for more info.
Here’s how tax brackets work.
2008 tax brackets:
$0 - $15,650: 10% of the amount over $0
$15,651 - $63,700: $1,565 plus 15% of the amount over $15,650
$63,701 - $128,500: $8,772.50 plus 25% of the amount over $63,700
$128,501 - $195,850: $24,972.50 plus 28% of the amount over $128,500
$195,851 - $349,700: $43,830.50 plus 33% of the amount over $195,850
$349,701 - No limit: $94,601 plus 35% of the amount over $349,700
What does this mean? This means that if I make more than the next guy, I’m not being taxed more on the same amount of money. I’m only being taxed more on the amount that I make above and beyond him. If Joe the bus driver and his wife make $63,700, and my hubby and I make $100k, we’re paying the exact same tax rate on that $63,700. I’m only paying a higher percentage on the last $36,300 of my income. That’s not even taking into account the fact that I can likely hire a better accountant with that additional income.
I’ll admit, I haven’t delved into the details of the small business changes, but I’m not a small business owner. But if it works out the same as regular tax brackets, the person making $251k will still be taxed exactly the same percentage on the first $250k of that. Only the 1k over and above 250k will be taxed an additional 3%.
Google how tax brackets work for more info.