Some people are intimidated by certain tax terms. One example would be “tax bracket.” What is a tax bracket, anyway? A tax bracket simply states what you will owe in taxes according to your income. Every bracket covers a specific range of income amounts and applies a base percentage for taxes. Let’s say, for instance, that you are in the 10% tax bracket. If you earned $4000 that year, you owe $400. If you earned $7600, you are liable for $760. What about the expression “moving into a higher tax bracket?” This means that if you earn more money and exceed your bracket’s cutoff point, you will automatically move into the next bracket. Hence, you will owe a higher percentage in taxes. Would this sort of defeat the purpose of increasing your income? Not at all. If you move into a higher tax bracket, this means that you are now in two or more tax brackets. In 2016, if you earned $9275 or less, you were in the 10% bracket. Let’s give an example. Say you earned $9000. Your income taxes would be $900. You got a promotion and a raise at work (which is wonderful news). You received a whopping $3000 annual raise. Thus, your income would be $12K. This means that you would owe 10% of the $9275 (which is $927.50), and you would also owe 15% of the raised income (which calculates to $408.75. This figure comes from 15% of the pay difference between $9275 and $12000. The total owed would be $927.50 + $408.75 = $1336.25). Although taxes can be complicated, you will have zero worries when you call Rozier. We’re here to assist you with your tax challenges. Call today!

You must be logged in to leave a reply.