Posted: 11/6/2008 6:09:11 AM EDT
| Hey guys I'm sorry if this is a stupid question. Are income tax brackets decided based on income before deductions or after. I know the amount of taxes you pay is based on after deductions but what about what bracket you are placed in? Reason I'm asking is because with the combined income of the wife and I we are just about on the line of going over the 61000 income tax bracket and I have an oportunity to make some more money in December, but don't want to make an extra thousand if it will cost me much much more than that in taxes from a move to a higher bracket. If it is decided after deductions then the standard deductions alone will keep us that amount below the 61000 mark. Thanks so much for all the input, I've just recieved too many different answers and 'I don't know's from people and I don't know enough about it myself. |
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No, it won't
a.. to answer your questions, brackets are after deductions But you misunderstand how brackets work. say 0-25,000 is the 10% bracket and 25,001 to 50,000 is the 20% bracket On your first 25,000 of earnings, you pay 10% ($2500) On your 2nd 25,000 you pay 20% (5000), NOT 20% on the whole thing. So, if you earned 50,000 dollars you would pay $7500 in this example, NOT $10,000. So, bumping you into the next bracket just causes you to pay more on those additional dollars. It's ALWAYS worth working more. There are no taxes (yet) over 50%. |