2014 Federal Tax Brackets

The 2014 Federal tax brackets are out: a little different this year after the Fiscal Cliff agreements passed by Congress.  In fact this was one of the most closely watched tax debates ever, and concluded with lots of changes to the 2014 federal tax brackets.

What’s New With 2014 Federal Tax Brackets?

Starting with tax year 2013, there’s a new federal tax bracket at the top of the heap: 39.6% for top-earning taxpayers making over $400,000. This new tax bracket exists for all filing status categories, as follows:

2014 IRS Tax Brackets Filing Status: Individual
Taxable Income Marginal Tax Rate
up to $8,925 10.00%
$8,925-$36,250 15.00%
$36,250 To $87,850 25.00%
$87,850 To $183,250 28.00%
$183,250 To $398,350 33.00%
$398,350 To $400,000 35.00%
Over $400,000 39.60%

Many feared the 10% rate would go away but luckily publication of the 2014 federal tax brackets by the IRS showed that it remained intact.  Here’s how the rest turned out:

2014 IRS Tax Brackets Filing Status: Married Filing Jointly
Taxable Income Marginal Tax Rate
up to $17,850 10.00%
$17,850 To $72,500 15.00%
$72,500 To $146,400 25.00%
$146,400 To $223,050 28.00%
$223,050 To $398,350 33.00%
$398,350 To $450,000 35.00%
Over $450,000 39.60%

 

2014 IRS Tax Brackets Filing Status: Head of Household
Taxable Income Marginal Tax Rate
up to $12,750 10.00%
$12,750 To $48,600 15.00%
$48,600 To $125,450 25.00%
$125,450 To $203,150 28.00%
$203,150 To $398,350 33.00%
$398,350 To $425,000 35.00%
Over $425,000 39.60%

A glance at the 2014 Federal Tax Brackets will show that most of us will pay under 30% in federal income taxes.  And don’t forget, these are marginal tax rates.  That means you don’t pay 28% or 33% or whatever rate your tax bracket shows, on all of your taxable income.  You only pay your top rate on the bit that’s in that bracket.  The rest of your income is taxed at rates corresponding to the tax brackets below your marginal tax rate.

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What Will the 2013 Federal Tax Brackets Be?

We’ve been enjoying George W. Bush’s federal income tax cuts since 2002 but now at the end of 2012 they are set to expire.  Congress will decide whether to keep the cuts or go back to five federal tax brackets, eliminating the nice low 10% bracket for everyone.

It’s likely that individual federal income tax cuts will be extended by Congress, but keep in mind that The Budget Control Act of 2011 requires the deficit be reduced by a certain dollar amount over the next nine years.  That’s going to be hard to achieve if Congress votes to extend the Bush era tax cuts.

What’s at stake?  Well the bottom drops out, literally.  We’ve paid 10% on the first $8750 or so (for single filers) for almost the past decade now.  The 2013 Federal Tax brackets may look very different without that bottom rung of the tax ladder.  It means we’ll all be paying more taxes on that first chunk of money we make: 50% more.

The higher end of the tax brackets would go even higher.  Right now, the highest percentage anyone pays for income tax is 35%.  Failure to renew the tax cuts would put two new brackets at the top: 36% and 39.6%.

Here’s what the 2013 Federal Tax Brackets would look like:

  • 15% (10% bracket folded into 15% bracket)
  • 28% (up from 25%)
  • 31% (up from 28%)
  • 36% (up from 33%)
  • 39.6% (up from 35%)

 

Notice the 10%, 25%, 28% and 33% are all gone, replaced with higher tax brackets. This is what the 2013 Federal tax brackets could look like if Congress votes not to extend the current tax rates/cuts.

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What is Your 2012 Federal Tax Bracket?

Federal tax brackets and tax rates are in the news lately, since tax season is here, but also because President Obama is calling for a 30% tax rate on millionaires.

That doesn’t mean that millionaires will be paying 30% of their entire income to the Federal Government.  Because of our tax bracket system, that figure refers only to the percentage paid on a portion of income.

Income is taxed at different rates for different portions of a salary.  The first eight to ten thousands dollars are taxed at 10%.  Then the rest, up to around $34,000 is taxed at a rate of 15%.  The the chunk of money from $33,951 up to $80,000 is taxed at 25%.  You get taxed at a higher rate for those bits of you salary that put you in higher federal tax brackets.

Now, those brackets for 2009 were $8,350, $33,950, and $80,000, marking the cutoffs for tax rate jumps.  Your 2012 Federal tax bracket will be the highest level (or bracket) your salary reaches: your top bracket is your tax bracket.

If you want to identify your 2012 Federal tax bracket, find the highest bracket into which your salary reaches, and there you are.  By the way, it’s also called your marginal tax rate.

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Understanding the Federal Tax Brackets

When it comes to paying taxes, we all know it’s a complicated business.  There are adjustments and varying levels of tax rates, making it difficult to estimate just how much money you’ll be handing over to the federal government each year.

It would be easy if say you could just take the percentage listed for your federal tax bracket -set’s say it would be 15%- and apply it to your salary.  But did you know that you don’t actually pay the full percentage listed for your income level in the federal tax brackets?  That is, if you hear someone say “I’m in the 28% tax bracket”…don’t be fooled because that person isn’t paying 28% on the full salary.  He or she is only paying 28% on a portion of the salary.

For example, if you make $90,000 a year, your federal tax bracket is 28%… but if you look closely at the tax tables, you’ll notice that in the  federal tax brackets for 2011, it reads like this:

If taxable income is over $83,600 but not over $174,400, the tax is $17025 plus 28% of the excess over $83,600

That means you’re only paying 28% on $6,400 of your income.  The rest is taxed at a lower rate.

And you won’t even be paying federal taxes on the full $90,000.  You will have at least a few deductions, meaning you may fall into a lower federal tax bracket after the adjustments are made.  That could bring your taxable income down below the $83,600 mark, at which point your tax rate would be $4,750 plus 25% of the excess over $34,500.  Big difference.

 

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Federal Tax Brackets 2011

2010

The Federal tax brackets for 2011 are different from 2010.  If you are in the lowest federal tax bracket you will see a dramatic increase in the amount of income taxes witheld from your paycheck.

In 2010, you could make up to $6050 during the year and not pay any income taxes at all.  The amount witheld would have been $0.  Now, the Federal tax brackets 2011 indicate you can only make up to $2100 to avoid paying income taxes.  So, for those making between $2100 and $6050 annually, it’s time to get used to the idea of paying income tax. Any single person making roughly $2100 to $6050 has now moved up a Federal tax bracket.  Congratulations!

There are other changes in Federal tax brackets 2011 that may affect you as well.  For those single people making  $67,700 to $84,450 you have also moved a few percentage points in the 2011 Federal Tax brackets.  Only for you, the move is downwards and therefore a good move.  In 2010 you paid $12,193 plus 27% of your income towards federal income tax.  For 2011, it’ll be $4750 plus 25%.

As you move up the Federal tax brackets and compare 2010 to 2011, there are slight changes but nothing as dramatic as the changes described above.  For example, If you made $84,450 to $87,700 both years, your tax changes from roughly $16,716 plus 30% in 2010 to $17,025 plus 28% in 2011.  That’s roughly $1500 less overall.

 

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Federal Tax Brackets

It’s hard to get a handle on your net worth or do a personal budget is you don’t know which of the federal tax brackets you fall into.  The amount of money the federal government takes out of your earnings can vary so widely it’s hardly worth using a general all-purpose percentage to estimate how much money you’ll have after taxes.  It can be anywhere from 10% to 35%, so yes it’s very important to know which of the federal tax brackets is yours.

The IRS will only take out 10% of your income for taxes if you make $8,500 or less per year.  That’s a pretty low cutoff amount for having that nice low percentage take out.  And that figure is for 2011.  It changes each year, so if you need to be precise, consult a federal tax brackets chart from the IRS.

The media lately is reporting that more and more people are either very poor or very rich…meaning that more and more people will fall into that lowest of federal tax brackets, 10%.  The next level up is anyone whose earnings fall between $8,501 and $34,500 (for 2011).  This is a very large segment of the population these recession-era days, and the rate is 15%.

Make more than $34,500 and you’re getting into the higher percentages where it really hurts.  It’s a quarter of your earnings taken out at this stageYou’ll add another 3% if you make between $83,601 and $174,400, putting you into the middle of the range of  federal tax brackets.

A third of your salary gets taken by the IRS if you make $174,401 to $379,150.  The for those above that level they add another nice 2% for the highest of federal tax brackets, for a total of 35%.

Keep in mind that this is for single tax filers only.  Everything is different if you are married and you’re filing your taxes jointly (together on one form).

If you want a visual of this:

10% Up to $8,500
15% $8,501 – $34,500
25% $34,501 – $83,600
28% $83,601 – $174,400
33% $174,401 – $379,150
35% $379,151 or more

 

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