Knowing what tax bracket you’re in is one of the best ways to prepare for tax season, especially when your unsure which bracket you fall into.
With the election of our new president, there have been some significant changes to the income requirements of each bracket, so it’s certainly worth looking into as your bracket may have changed compared to last year.
One of the important things to understand about tax brackets is that you are only taxed a certain percentage for the money you make in each bracket.
This may seem unclear at first, but here’s an example: Fred makes $80,000 a year and is due for a small raise that will bring him up to $83,000 a year. The 25% bracket stops at $82,250, so Fred’s entire income will now be taxed at 28%, right? Actually, that’s not how it works!
The first $82,250 of Fred’s income will still be taxed at the old 25% rate and only the extra $750 he made above the 25% tax bracket will be taxed at the 28% rate.
Here are the tax rate schedules for 2009:
Single Filing Status
(Tax Rate Schedule X)
- 10% on a yearly income of $0 - $8,350
- 15% on a yearly income of $8,350 - $33,950 plus $835
- 25% on a yearly income of $33,950 - $82,250 plus $4675
- 28% on a yearly income of $82,250 - $175,550 plus $16,750
- 33% on a yearly income of $175,550 - $372,950 plus $41,754
- 35% on a yearly income of $372,950 or higher plus $108,216
Married Filing Jointly or Qualifying Widow(er)
(Tax Rate Schedule Y-1)
- 10% on a yearly income of $0 - $16,700
- 15% on a yearly income of $16,700 - $67,900 plus $1,670
- 25% on a yearly income of $67,900 - $137,050 plus $9,350
- 28% on a yearly income of $137,050 - $208,850 plus $26,637.50
- 33% on a yearly income of $208,850 - $372,950 plus $46,751.50
- 35% on a yearly income of $372,950 or higher plus $100,894.50
There is certainly more to learn about IRS tax brackets. A good place to do this is at TurboTax Online, where you can not only read about tax brackets, but you can even file your return by following guided instructions.
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