Marginal tax bracket
Taxes make most cringe and hesitate to make decisions that will make their taxes increase. This is completely understandable as taxes should be a function of any major financial decision. But when I hear hesitation due to being pushed into a higher tax bracket, it gives me pause. Pause because the reality is different than assumptions made. The Federal tax system is graduated, meaning that we each are taxed at the 10%, 12%, 22%, 24%, 32% and so on tax bracket. The first $19,750 of income (if Married Filing Joint) is taxed at 10% Federal tax rate. The next $60,500 of income is taxed at 12% and so on. If a married couple earns $125,000 in 2021, then we can expect the following tax. Often it is incorrectly assumed that the entire income amount is taxed at the highest tax bracket, which is not true.
The information contained herein is based on our understanding of current tax law. The tax and legislative information may be subject to change and different interpretations. We recommend that you seek professional legal advice for applicability to your personal situation. As required by the IRS, you are advised that any discussion of tax issues in this material is not intended or written to be used, and cannot be used, (a) to avoid penalties imposed under the Internal Revenue Code or (b) to promote, market or recommend to another party any transaction or matter addressed herein.
