TAX TIME IS HERE - How to better understand Income Tax Brackets?

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Confused about doing your Income Taxes? Who isn't? Here's a brief explanation to help out.

                  The United States uses a Graduated Income Tax System 

Tax table for the year 2022.     Taxes are due April 17, 2023

Tax Rate Single Filer Married Filing Jointly Married Filing Separately The Head of Household
10% $0 to $10,275 $0 to $20,550 $0 to $10,275 $0 to $14,650
12% $10,276 to $41,775 $20,551 to $83,550 $10,276 to $41,775 $14,651 to $55,900
22% $41,776 to $89,075 $83,551 to $178,150 $41,776 to $89,075 $55,901 to $89,050
24% $89,076 to $170,050 $178,151 to $340,100 $89,076 to $170,050 $89,051 to $170,050
32% $170,051 to $215,950 $340,101 to $431,900 $170,051 to $215,950 $170,051 to $215,950
35% $215,951 to $539,900 $431,901 to $647,850 $215,951 to $323,925 $215,951 to $539,900
37% $539,901 or more $647,851 or more $323,926 or more $539,901 or more

The more money you make, the higher your income tax bracket gets however, what is often somewhat confusing to people, is that your Entire Income is not taxed at the same rate as that of the bracket you fall into.  

For example: If you are filing under SINGLE and your income falls within the 32% tax bracket:

The amount of your income that falls between the range of $0 to $10,275 is taxed at 10%
The amount of your income that falls between the range of $10,276 to $41,775 is taxed at 12%
The amount of your income that falls between the range of $41,776 to $89,075 is taxed at 22%
The amount of your income that falls between the range of $89,076 to$170,050 is taxed at 24%

Only the amount of your income that falls between the range of $170,051 to $215,950 is taxed at 32%

Qualifying Widow or Widower

If your spouse passed away in 2022, and you meet certain requirements, you may be eligible for the tax status of Qualified Widow or Widower.  The Qualifed Widow or Qualified Widower standard deduction is the same as married filing jointly.  If your spouse died in 2022, you may only qualify for income tax purposes as a Qualifying Widow or Widower for 2023 or 2024 if you meet the requirements listed below:

To qualify, you must meet these requirements:

  • You qualified for married filing jointly with your spouse for the year he or she died
  • You didn’t remarry before the close of the tax year in which your spouse died
  • You have a child, stepchild, or adopted child you claim as your dependent
  • You paid more than half the cost of maintaining your home

You can continue to file your taxes under the category of “married filing jointly” for one year or for two years if you have dependent children.  After that, you would file under Single if you did not remarry or Head of Household if you have dependants.  Your own situation may differ, please consult with a professional Tax Accountant.

Taxes are due on April 18, 2023 for the above tax brackets

Corporations (including S and C Corps) - C corporations (Form 1120) also file on April 18.
S corporations (Form 1120S) and partnerships (Form 1065) file on March 15.

Missing the tax filing deadline without filing an extension means that the IRS can charge penalties and interest on your taxes owed which could result in a .5% monthly penalty on the amount due, up to 25% on top of your originally owed taxes, plus interest.

For FREE help with general tax questions, the Internal Revenue Service's Interactive Tax Assistant (ITA) can assist you at this link ITA | Internal Revenue Service (irs.gov)

This article is for informational purposes only and should not be considered as tax or financial advice.  Please verify your tax status with an accredited CPA, or other professional Tax Accountant. 

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