We are over halfway through the year. Do you know how much you will have to pay this year in taxes? Are you afraid of earning more income and going up a tax bracket? We will review how the tax brackets work. It is not as bad as you may think.
Tax Bracket for 2017
| Tax Rate | Single | Married Filing Jointly | Married Filing Separate | Head of Household |
| 10% | $0-$9,325 | $0- $18,650 | $0-$9,325 | $0- $13,350 |
| 15% | $9,326- $37,950 | $18,651- $75,900 | $9,326- $37,950 | $13,351- $50,800 |
| 25% | $37,951- $91,900 | $75,901- $153,100 | $37,951- $76,550 | $50,801- $131,200 |
| 28% | $91,901- $191,650 | $153,101- $233,350 | $76,551- $116,675 | $131,201- $212,500 |
| 33% | $191,651- $416,700 | $233,351- $416,700 | $116,676- $208,350 | $212,501- $416,700 |
| 35% | $416,701- $418,400 | $416,701- $470,700 | $208,351- $235,350 | $416,701- $444,550 |
| 39.6% | Over $418,400 | Over $470,700 | Over $235,350 | Over $444,550 |
If you were single and earning $110,000, you will be in the 28% tax bracket. However, if you are expecting your income in 2017 to be in the $200,000, you will be in the 33% bracket.
Going from one tax bracket to the next can be scary. Most believe that going from one tax bracket to another means you will pay a whole lot more taxes. However, this is not necessarily true. The U.S. tax bracket is based on a stepped up system. The first portion of your income is taxed at 10%. The second portion of your income is taxed at 15%. The next portion at 25%. And so forth.
How to Use the Tax Brackets
Example 1: You are married and file jointly with your spouse. You and your spouse expect to earn $150,000. You are in the 25% tax bracket.
0 – 18,650 is taxed at 10%, 1,865
18,651 – 75,900 is taxed at 15%, 8,587
75,901 – 150,000 is taxed at 25%, 18,525
You can expect to pay 28,977 in taxes. (1,865 + 8,587 + 18,525 = 28,977)
As you can see, you in the 25% tax bracket. However, this does not mean all your income is taxed at 25%. 25% of 150,000 is 37,500. You will not pay this much in taxes. You will actually pay 28,977.
Example 2: You are married and file jointly with your spouse. You and your spouse expect to earn more this year, $155,000. You are now going to be in the 28% tax bracket.
0 – 18,650 is taxed at 10%, 1,865
18,651 – 75,900 is taxed at 15%, 8,587
75,901 – 153,100 is taxed at 25%, 19,300
153,101 – 155,000 is taxed at 28%, 532
You can expect to pay 30,284 in taxes. (1,865 + 8,587 + 19,300 + 532 = 30,284)
In this example, you are considered to be in the 28% tax bracket. Because you jumped to the next tax bracket, it does not mean all income is now be taxed at 28%. Only a small portion of your income is actually taxed at 28%, 1,899.
Tax Foundation. “2017 Income Tax Brackets.” Web. 10 November 2016.