Basics To Figuring Out Your Tax Bracket

tax bracket

When talking about taxes, the issue of tax bracket often comes up and it’s an important factor in deciding what tax options are best for your situation. The problem is that the average person probably doesn’t know which tax bracket they are in. Knowing your tax bracket can be useful when trying to make decisions that affect your taxable income each year. For example, if you work a second job, sell some stock, or do a ROTH IRA conversion, how much will you be taxed on these different scenarios? You will have no clue unless you have know what tax bracket your fall under.

The easiest way to figure out your tax rate is to grab last year’s tax return. Assuming you filed the

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10 Responses to Basics To Figuring Out Your Tax Bracket

  1. Dy says:

    First year out of college and I’m already in the 28% tax bracket. It only gets worse from here right?

  2. Teri says:

    Not necessarily, but I have to say you are making a SUPER wage for right out of college then. ;)

    But have some kids and get a mortgage, it ain’t so bad.

    Setting aside money for retirement can help too.

    & if you continue to make a lot of money, well that is the downside. It will definitely get worse…

  3. Amy F. says:

    Yes, if you’re already making that much money, it doesn’t seem like things are too bad!

    Teri, thanks for explaining this issue so simply and clearly.

  4. Andy says:

    I will be doing some work on the side that is un-related to my job. It will only be for a week. I understand that earning less that $2,000 for anything unrelated to your income is not taxable. Is this true, or what is the maximum amount you can make and not need to claim it on taxes?

  5. Joseph says:

    All income is taxable, no matter where it came from. Even if it is from illegal things.

  6. Andy says:

    No, not all is taxable. I guess it depends onhow income is defined. If I sell my shoes for money, then that is not taxable income. If I sell shoes for a living then it is. If my neighbor pays me to watch her cat, that is not taxable, if I watch cats for a living, then it is… So, somewhere there is a definition of what constitutes taxable income. And, I think it is a dollar figure. This job I am doing for only one week is not my source of income, and will pay right around $2,000. I remember something that income not related to your regular vocation which is less than $2,000 is not considered taxable income. If so,then I dont want to exceed that limit (too much of a hassle to do taxes).

  7. Paulito says:

    Andy, Joseph’s comment is accurate, in that all income must be reported:

    – if your shoes suddenly increased in value, and you sold them for a hefty profit, the IRS would come knocking
    – cat-sitting is reportable income (just like babysitting, income from hobbies, etc)

  8. Teri says:

    Oh I thought I already replied – but don’t see it. Sorry Andy. If you make $1, sorry to say, it is taxable. Paulito’s comment is right on. There is no thresshold here. If you have expenses relating to this work though, you can use the expenses to offset the income. Sorry to say though any side income is subject to self-employment tax too, for the most part.

  9. Andy says:

    ahh. thanks.

  10. Phil says:

    Yeah Dy, quit complaining and pay your fair share :) Haha, just razzing ya.

    I’m in the 25% bracket, but I come from a family that never made out of the 15% marginal.tax rate.

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