Income Tax Rates
by ELIZABETH CHECKLEYYou’d think that determining your tax rate would be the least of your troubles, but there are a couple of things to keep in mind. Your tax rate is dependent on your income (clearly) as well as your filing status.
Things to Keep in Mind When Determining Your Income Tax Rate
- Your tax rate isn’t based upon just your job, but rather your total taxable income. This includes interest income, distributions from pension plans, a decrease in your deductions, etc.
- Items that are taxed at different rates (long-term capital gains, dividends, etc.) than your ordinary income do not affect your tax bracket.
- Your withholding amount on your paystubs cannot be used to determine your tax rate.
- Tax brackets aren’t the same as marginal tax rates. Tax brackets provide a good estimate of your tax rate, but your actual tax rate (effective marginal rate) may vary slightly depending on deductions and exemptions.
Common Problems
- Incorrect calculation of wages, salary, and income
- Incorrect deductions
- Incorrect adjustments to income
- Incorrect number of exemptions
Next The Making Work Pay Tax Credit »
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