What are Tax Brackets?

People hear about tax brackets but sometimes do not realize how the tax brackets affect them. Every penny we make is assigned a tax rate and the increase when you make more money. The first dollar you make is taxed at a lower rate and the last dollar is taxed at a higher rate. So what are tax brackets?

Tax Brackets

Tax brackets are rates at which people are taxed. These tax brackets are set according to income levels of individuals. People with low incomes are taxed at a lower rate. People with higher incomes are taxed at a higher rate.

Tax rate and marginal tax brackets are other names for tax brackets. The income that is left over after pre-tax and tax breaks is the income considered for tax brackets. As the inflation changes, the tax brackets or tax rates change also.

10%, 15%, 25%, 28%, 33%, and 35% are the six tax brackets for individuals. The tax brackets for corporations is as follows: Incomes $50,000 or less is 15%, $50,000 to $75,000 is 25%, $75,000 to $100,000 is 34%, $100,000 to $335,000 is 39%, $335,000 to $10 million is 34%, $10 million to $15 million is 35%, $15 million to $18.3 million is 38%, and $18.3 million and up is 35%.