Tax Bracket Questions

[mikegg]

Edit: thanks for answering question.

How does the government deal with people making $85651? You basically fall into a higher tax bracket but actually take in much less money.

 

[venkman]

Tax rates are marginal, meaning you only pay 28% on the income above $85650 a year (or $4,350 in your case). Someone making $85651 a year would pay 28% on only $1.

 

[rcpratt]

You're only taxed at 28% on your earnings above $85,650.

Just like you're only taxed at 25% on your earnings above ...whatever. 50k? I have no idea.

And down the chain.

 

[Ns1]

Tax rates are marginal, meaning you only pay 28% on the income above $85650 a year (or roughly $4,340 in your case). Someone making $85651 a year would pay 28% on only $1.

anyone that says differently than this is a moron and should not be listened to.

 

[mikegg]

Gotcha. Makes much more sense to me now. Phew....!!!

 

[techie81]

I am not sure but in California if you make over a certain amount you pay a marginal rate AND a fixed dollar amount.

For earnings between $0.00 and $7,124, you'll pay 1.00%
For earnings between $7,124.00 and $16,890, you'll pay 2.00% plus $71.24
For earnings between $16,890.00 and $26,657, you'll pay 4.00% plus $266.56
For earnings between $26,657.00 and $37,005, you'll pay 6.00% plus $657.24
For earnings between $37,005.00 and $46,766, you'll pay 8.00% plus $1,278.12
For earnings between $46,766.00 and $1,000,000, you'll pay 9.30% plus $2,059.00
For earnings over $1,000,000.00, you'll pay 10.30% plus $90,709.76

Look at the difference between greater or less than 46,766

 

[Taughnter]

I make about 90k/year which means I fall into the 28% tax bracket. If I make $85650/year, then I'd fall into the 25% tax bracket.

But when you do the calculations, I only take in $600 more than someone making $85650/year.

Is there anything I can do to take in more money?

How does the government deal with people making $85651? You basically fall into a higher tax bracket but actually take in much less money.

You're demonstrating a common misconception about tax brackets and tax rates. You don't actually "fall into" a bracket, you are paying tax in all of the brackets up to 28%. Instead you have a marginal tax rate, which is the tax you would pay on the next dollar you make. If you have a salary of $90,000.00, your marginal tax rate is 28%, but the taxes you paid on the previous 90,000.00 are substantially less than 28%. You are paying 10% tax on the first $8,700 of taxable income, then 15% on the next $28,350 and so on. You only pay 28% on the taxable income above $85,650.

Maybe looking at the brackets here will make more sense to you, as you can see the bracket only applies to a certain income range, not all income after you have reached a threshold.

 

[venkman]

I am not sure but in California if you make over a certain amount you pay a marginal rate AND a fixed dollar amount.

For earnings between $0.00 and $7,124, you'll pay 1.00%
For earnings between $7,124.00 and $16,890, you'll pay 2.00% plus $71.24
For earnings between $16,890.00 and $26,657, you'll pay 4.00% plus $266.56
For earnings between $26,657.00 and $37,005, you'll pay 6.00% plus $657.24
For earnings between $37,005.00 and $46,766, you'll pay 8.00% plus $1,278.12
For earnings between $46,766.00 and $1,000,000, you'll pay 9.30% plus $2,059.00
For earnings over $1,000,000.00, you'll pay 10.30% plus $90,709.76

Look at the difference between greater or less than 46,766

It's the same thing, all the chart is doing is converting the tax brackets below the bracket your income falls into a fixed dollar amount.

If you made $46,767, you would pay ($46,767-$46,766)*.093 + $2,059 or $$2.059.09. If you made $46,765 you would pay ($46,765-$37,005)*.08 + $1,278.12 which is $2058.92. So making $2 more means 17 cents more tax.

Also, TIL California has some damn high state income tax rates.

 

[techie81]

It's the same thing, all the chart is doing is converting the tax brackets below the bracket your income falls into a fixed dollar amount. IE, 1% of $7124 = $71.24 so if you made $12,124, you would pay ($12,124-$7,124)*.02 + $71.24 or
$171.24 in taxes.

Also, TIL California has some damn high state income tax rates.

Thanks for that! I was always confused about how to read that chart. Yes, we have some very high taxes and in addition to the high income taxes we have very high property taxes. Sucks.

 

[mikegg]

Yes wow, CA taxes are nuts.

 

[Brovane]

Thanks for that! I was always confused about how to read that chart. Yes, we have some very high taxes and in addition to the high income taxes we have very high property taxes. Sucks.

Well if you are old and have been living at the same property for 30+ years your property taxes are very reasonable.