Tax brackets are the divisions at which income tax rates change in a progressive tax system. Essentially, they are the cut-off values for taxable income. As income past a certain point, it will be taxed at a higher rate.
In the US, the dollar amounts of the Federal income tax standard deduction and personal exemptions for the taxpayer and dependents are adjusted yearly to account for inflation. This results in annual changes to the personal income tax brackets even when the Federal income tax rates remain the same.
Understand the concept of tax brackets might help to plan an annual pay. This determines how much one should give to the IRS and the percentage that can be claimed from deductions. It is important to have basic knowledge on how they work. We can generalize that federal tax brackets can be divided into six brackets. these are 10, 15, 25, 28, 33 and 35 percent brackets. Below is the IRS Tax Brackets 2011:
Tax Bracket Single Married Filing Jointly Head of Household
10% Bracket $0 – $8,500 $0 – $17,000 $0 – $12,150
15% Bracket $8,500 – $34,500 $17,000 – $69,000 $12,150 – $46,250
25% Bracket $34,500 – $83,600 $69,000 – $139,350 $46,250 – $119,400
28% Bracket $83,600 – $174,400 $139,350 – $212,300 $119,400 – $193,350
33% Bracket $174,400 – $379,150 $212,300 – $379,150 $193,350 – $379,150
35% Bracket $379,150+ $379,150+ $379,150+
The threshold for this year’s tax brackets have all increased for each filing status. The taxable income threshold for separating the 15% bracket from the 25% bracket is $2,800 more now. That applies if you fall into the category of married couple filing a joint return.
Based on the above percentages, it can be said that federal income tax brackets are largely based on the amount of income one has. Also, these are bound to change every year in accordance to the rate of inflation. The income tax brackets are classed in accordance to the last dollar earned. The taxable income does not compare to the net total amount of the salary. One has to add up the income generated over the years whether from work or other places and hence, come up with the total amount of taxable income.
If you don't know what category you place in, you can find out with a click of your mouse. The IRS has a tax bracket table that sets it all out for you. First of all you have to know your filing status, how much money you made, and what type of deduction you will take. With that information you will see right where your taxable status is.
Getting professional help especially, if you do not understand the complexities of income tax brackets will make your planning more accurate and efficient. There are several options through which you can get solid advice that will guide you through the entire process of calculating your tax brackets. Having private tax analysts checks your status and gives you advice on how to proceed on the payment scheme will make paying your taxes more efficiently and you will end up losing money as well. This is most true if you don’t know your way into things as sensitive as this.
Considering this ahead of time when tax brackets 2011 have to be completed will create more time to prepare. Since the rates change every year, it is clear that you need to be assessed on your status for this year’s federal tax brackets 2011 rates.