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Articles
Income Tax Brackets
When someone tells me that she is in the 28% tax bracket, what does that mean? How do you determine which tax bracket you belong to?
Below are the taxable income brackets for 2004. There are six brackets and each depends on your taxable income. If you receive your W-2 form from your employer and your taxable wages was $60,000 for 2004, does that mean you are in the 28% tax bracket? The answer is no. Here is why:
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10% bracket ends at |
15% bracket ends at |
25% bracket ends at |
28% bracket ends at |
33% bracket ends at |
35% bracket ends at |
| Married filing separately |
$7,159 |
$29,050 |
$58,625 |
$89,325 |
$159,550 |
Over $159,550 |
| Single |
$7,150 |
$29,050 |
$70,050 |
$146,750 |
$319,100 |
Over $319,100 |
| Head of Household |
$10,200 |
$38,900 |
$100,500 |
$162,700 |
$319,100 |
Over $319,100 |
| Married filing jointly or qualified widow(er) |
$14,300 |
$58,100 |
$117,250 |
$178,650 |
$319,100 |
Over $319,100 |
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Lets say your income tax is simple:
- You are married and have two children under age 15. Your husband does not work.
- W-2 form states that you earned $60,000.
- Received a refund of $1,000 from the state you reside.
- $3,000 deposited into a traditional IRA (company taxpayer works for does not have a retirement plan).
- Itemized deductions (medical, taxes, mortgage interest, contributions) totaled $28,000.
- Exemptions are at $3,100 per person bringing the total to $12,400.
What is your taxable income?
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Balance |
| Income (wages $60,000 plus state refund $1,000) |
$61,000 |
| Adjusted Gross Income (less $3,000 deposited to IRA) |
$58,000 |
| Itemized Deductions (less $28,000) |
$30,000 |
| Exemptions (less $12,400) |
$17,600 |
| Taxable Income |
$17,600 |
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The $17,600 puts taxpayer between the 11% to 15% tax brackets. At a taxable income of $17,600, the income tax due will be (according to the tax tables) $1,929. If you divide $1,929 by $17,600, taxpayer’s income tax rate was 11%.
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