How Do I Know What Tax Bracket I Am In?

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Tax brackets. You hear a lot about them come tax season yet very few people can describe them accurately.

However, it is very important that you understand your tax bracket. It not only determines what type of tax you will owe the IRS but also helps factor in certain deductions and credits.

Get the tax help you need today to answer your tax return questions.

What is a Tax Bracket?

The United States enforces what is known as a ‘progressive tax system.’ It is a fancy way of saying that people with higher taxable incomes generally pay more in federal income taxes based on their tax bracket rate.

It helps separate the American people based on the money they earned not only from jobs over the course of one year but other types of taxable income as well.

There are a few important things you need to understand about tax brackets:

The good news is even if you earn enough income to be in the 22% bracket for one type of earnings, you are not always taxed that same amount for other types of income you report.

New Tax Bracket Rules

In case you didn’t already know, federal income tax received a major overhaul for the 2018 tax year thanks to legislation known as the Tax Cuts & Jobs Act.

Among its many changes, the Tax Cuts & Jobs Acts altered seven different tax brackets, so even if you had a clear understanding of your tax bracket in the past, it is a good idea to get a refresher. The tax brackets that were altered based on the Tax Cuts & Jobs Act are 10%, 12%, 22%, 24%, 32%, and 37%.

2019 Federal Income Tax Brackets

Now that the deadline for 2018 taxes has passed, it is time to look towards April 2020. Here is what you can expect from the following tax brackets:

Single Filers

Married, Filing Jointly

Married, Filing Separately

Head of Household

How to get a lower tax bracket?

In order to reduce your tax liability, there are ways that you can improve upon your tax bracket. The two most common ways are via tax credits or tax deductions.

Tax credits are more preferred as they reduce the amount of tax you owe and do not affect the bracket you are in, while tax deductions reduce how much of your income is subject to taxes. It lowers your taxable income by the percentage of your highest federal income tax bracket. It is a little more complicated to correctly calculate tax deductions but it can still deliver you savings in the long run.
To get more assistance regarding your tax bracket and its calculations, contact Levy & Associates by visiting www.levytaxhelp.com

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