Tax-Savvy_Flipbook_2023

What Happens at the Edges People sometimes worry about being “pushed into a higher tax bracket,” but only the amount of income that is in the next bracket is taxed at the higher rate. The rest of the income is taxed at rates in the lower bracket(s). Looking at your taxes this way may make it easier to assess the true value of potential deductions and the taxability of additional income. For example, once you reach the 24%marginal tax threshold, you would owe $240 in taxes for each additional $1,000 of income up to the 32% threshold. The Bigger Picture Your effective tax rate —the average rate at which your income is taxed—offers a clearer view of the portion of income that goes to Uncle Sam. To determin e your effective rate, divide your total taxes by your taxable income. Returning to the previous example, a marrie d couple (filing jointly) with $100,000 in taxable inco me would have an effective tax rate of about 12.6%. First $22,000 at 10% rate $ 2,200.00 Next $67,450 at 12% rate + $ 8,094.00 Next $10,550 at 22% rate + $ 2,321.00 $12,615.00 $12,615 ÷ $100,000 = 12.6%

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