I can’t think of anyone who gets into business and hopes that they never make any more money than they did on day one. Even if money isn’t a great motivator for you, you still want your personal wealth to grow over time. As you know, as your income and your wealth grows so too does the amount of money you’re expected to pay in taxes, depending upon which tax bracket you fall into. There has been a lot of conversation about how the new tax bill will affect the taxpayers and the economy over the long term, we certainly won’t sort that issue out here today. But here are three important facts you should know about tax brackets.
There Are Seven
Even in light of recent changes to the tax bill the number of tax brackets remains the same. The brackets are a range of taxable income from low to high. Everyone within that range pays the same percentage in taxes for the year. Those percentages range from 10% to 37% depending on the income and whether they are filing as a single person or a married person filing individually or as a couple.
They Differ Depending On Your Filing Status
There are two different set of brackets, one for single people and married people who choose to file individually, and one for married people who choose to file jointly. The decision to file in one way or the other is completely up to the family and a decision that requires some thoughtful planning and sometimes the advice of a qualified professional. One reason some families choose to file individually is because their combined income bumps them into the next tax bracket causing them to owe much more money to the IRS.
Your Taxable Income Is More Than Just Your Salary
It’s easy to think that whatever your yearly wages is should determine your tax bracket. That’s certainly part of the equation, but there are many more factors that go into determining your taxable income. In addition to your wages, taxable income includes all of your income sources including investments and retirement distributions.
If all these numbers have your head spinning and finances just aren’t your thing, find a qualified IRS specialist to help you make sense of your tax situation. At Fix-It Accounting we provide high-quality, concierge-level service so that our clients can stop worrying about taxes and start enjoying their lives. Give us a call today and tell us what’s going on with your taxes and we’ll show you how we can fix it.