How to Know What Tax Bracket I'm in & What Tax Rate I Pay
Knowing your tax bracket helps you budget for your tax bill.
Not every dollar of income is taxed at the same rate. Instead, as you earn more money, you progress to higher tax brackets so some of your dollars are taxed at higher rates. For example, in 2013 if you're single, the first $8,925 of taxable income is taxed at just 10 percent, but any income over $425,000 is taxed at 39.6 percent. However, not all of your income is taxed because of various deductions and personal allowances allowed by the Internal Revenue Service. To figure your tax bracket, you need to know how much you make and how much you're allowed to deduct.
Add up all your taxable income for the year to find your total income. This includes the money you earned from working and interest on your bank accounts. For example, if you earned $35,000 at your job and $200 in interest, your total income is $35,200.
Add up all your
deductions for the year, including your personal allowance and standard deduction. For example, in 2013, the standard deduction for singles is $6,100 and each personal allowance is $3,900. If you claim a $1,000 deduction for a contribution to your "traditional" IRA, you have $11,000 of deductions.
Subtract your deductions from your total income to find your taxable income. In this example, subtract your $11,000 of deductions from your $35,200 in total income to find you have $24,200 in taxable income.
Find your tax bracket for your filing status by finding the range in which your taxable income falls. For example, in 2013 if you're single and have an income between $8,926 and $36,250, you fall in the 15 percent tax bracket. This means that you pay 15 percent on your "last dollar" of income, not 15 percent on your entire income. For example, the lowest tax rate of 10 percent is applied to the first $8,925 of your income. The next portion of your income is then taxed at 15 percent.Source: classroom.synonym.com