What’s Your Tax Bracket?

Do you know your tax bracket? This is often something a lot of people just misunderstand, okay? They just don’t have a firm grasp or understanding of our tax system here. So in the US we have what’s called a progressive tax system. So what that means is that your income is broken down into different portions, okay. And each portion is taxed at a different rate.

Okay. So the first portion or tax bracket for a married couple runs from $0 or $1 all the way up to $24,800. Okay, that first portion of your income, first tax bracket is taxed at 10% for a married couple. Then the next portion of your income that is what we call your 12% bracket. That runs from $24,801 all the way up to $100,800.

Okay. And this portion is taxed at 12%. But where a lot of people get this misunderstanding is if they bump up into tax brackets, they think, well, that makes all of their income tax at that higher rate. And that’s just not true. So based on this progressive tax system that we have only the portion of income that falls into those different tax brackets are taxed at that specific rate.

Okay. So why do you need to pay attention to this? Well if you’re a planner, okay, you want to make sure you’re aware of different, you know, deductions credits and contribution strategies so that you aren’t paying more than you should in taxes. Right? Nobody wants to pay Uncle Sam more than they have to. You want to keep that money in your pocket.

So I ask you again, do you know your tax bracket?