Tax brackets. They’re a thing. Where do you fit in, and what
do they mean for you? Learning more about tax brackets is important, as they
can impact your wallet in more ways than one. Loosely explained, tax brackets
will determine what you’ll spend on taxes based on how much you make. Here is
some more information to help you better understand what this means for you:
If you make more, you pay more
While you may not love the fact that if you make more, you
will be charged taxes in a different tax bracket, it’s the way things are done.
People who make more money will be taxed higher, and that kind of makes sense.
To find out what tax bracket you may be in, you’ll want to calculate your
income, and whether you use Intuits Accountants software or look it up on the IRS page, you can prepare accordingly.
Filing status and how it impacts you
Something else that you may want to know about tax brackets is that your filing status is also taken into
consideration. Because the way that a married couple could file may be different from what one may file as a
single, it’s important to take a look at the different filing statuses, what
this means for you, and where you may fit in a tax bracket.
Are you married, and do you file your taxes jointly or
separately? Take time to research what this means for you. If you’re not yet married but you and your partner plan to be, determine what the best filing
status could be for you by understanding how your double income and bracket
would be once married. Wherever you can save money, the better it will be for
you.
Bonus or extra income raising your bracket
Let’s say that you’re traditionally in a specific bracket
with your typical income. However, if you get some extra cash, whether through
some extra work or a bonus, this could boost you into another tax bracket.
While the extra money may be nice, the higher taxes may not. Consider the fact that the raise or bonus is what will be
taxed, not the entirety of your income.
Credit and deductions matter
We’re all about saving money, both when it comes to our
taxes and otherwise. If you’re concerned about a higher tax bracket and the
extra taxes you’ll owe, know that credits and deductions can help you save some money
along the way.
For example, tax credits help you save money, regardless of
your tax bracket. You can get tax credits for a variety of reasons, from child
tax credits to sustainability initiative credits. Deductions make it so that
your income is “lower,” thus putting you in a different tax bracket. If you
don’t know much about deductions and credits, a tax accountant can help by
providing input that makes it easier for you to understand.
They often change
Something else to account for is that tax brackets do
change. You’ll find that as inflation and the economy impact our income, tax
brackets adjust to the current economic state of the country. That’s why it’s
important to stay up to date with the changes that happen over the years and
don’t take your tax bracket as a given just because that’s the way it was the
previous year. This is welcome information for those who may be feeling the
impact of inflation on their income and don’t cherish the idea of being taxed
in a higher tax bracket.
In Conclusion
Are you concerned about next year's taxes? If so, it’s time
to start thinking ahead and planning for your tax payments next year. Take time
to determine what tax bracket you may be charged in so you don’t get caught
unaware.
