Hello, I'm Jeremy from TurboTax with some important information about how you can determine your income tax bracket.
When most taxpayers talk about the tax bracket they are in, they are usually referring to the highest rate of tax applied to their income. But the truth is, different portions of your income are taxed at different rates.
When you finish your tax returns and use the tax tables and the instructions to figure out what you owe, it will not tell you what tax bracket you're in. This is because those figures already reflect the combined tax rates for your taxable income.
If you want to know your tax bracket, you must reference a separate tax rate table that shows exactly which portions of your income are being taxed at each rate.
- For example, if your taxable income in 2010 is $82,000, you can easily see that the highest tax bracket you are subject to is 25 percent since your income is within the bracket's range.
- But this does not mean that you pay 25 percent on your entire taxable income. It just means that 25 percent was the highest tax rate you paid.
However, you would also see that you were taxed at rates of 10 percent and 15 percent. If you calculated each portion of your income at these three rates, it would add up to the same amount of tax you see in the tax tables for your filing status at the back of your instructions.
For more tax tips and guidance, visit TurboTax.com.