How to Understand Tax Brackets

At the end of the year in preparation of the coming year’s income tax season, elected officials compute what every citizen should pay based on their income. The rate to charge is a very contentious subject that affects who is President in the white house, the House of Representatives and the Senate, who vote on the effective rates to charge. 

• Start with your marital category- Single, married, married filing separately and head of household.


• Earn income from a paying job, social security, unemployment or business for self-income, as an example.


•  Subtract out the deductions allowed to reduce this amount.


• Make the first deduction for the number of people living in the household majority of the year? 


• Deduct the amount of property taxes and interest on the mortgage if you are a homeowner.


• Note if you have moving expenses for a job, the unpaid part is deductible.


• Note any catastrophe cost like hurricane and earthquake.


• Add in all Donations to charity, both money and household goods, including to churches.


• Insert Medical and dental expenses not covered by insurance.  


• Calculate once you take all the deductions from the amount you receive to determine the adjusted income. Your tax bracket reflects the increment percentage of your income that is due to be paid in taxes to the federal government, and all people in the same category. 


• Remember thought process is that those making the most pay a higher percentage of taxes, and those making very little pay little or no taxes. So, people with low incomes pay a dime on every dollar they make, and those with more money pay a quarter. The goal is to pay a dime with enough deductions.