There is a lot of talk lately about tax brackets and who
falls into which bracket. All of this talk can be confusing and overwhelming,
especially if you don’t really understand what tax brackets are all about.
The first thing to understand is that tax brackets exist
because America has what is referred to as a progressive tax system. That means
that people who earn more are typically taxed more. The IRS determines how much
people are taxed by placing them into different tax brackets based on their
incomes.
Right now, there are seven tax brackets in existence. Those
who fall into the lowest tax bracket are taxed at a 10% rate while those who
fall in the highest tax bracket are taxed at a 39.6% rate. These figures do
change each year; they typically get higher since they are adjusted for
inflation.
A lot of people feel that it is unfair to be taxed more
simply because they earn more. Even those who don’t mind the system, however,
often find ways to try and pay less in taxes, such as through exemptions, deductions,
and adjustments. How valuable different tax-lowering measures such as these
will be to you all depends on the tax bracket that you fall into, so knowing
that information is the first step toward making a “plan of attack” for how to
pay less in taxes.
