Comments on: What’s My Tax Bracket?

By: eric

eric — Sun, 28 Mar 2010 23:29:10 +0000

I’m always surprised to find out how many of my friends don’t know anything about their tax rates. Definitely something to keep in mind.

By: jsbrendog

jsbrendog — Wed, 17 Mar 2010 20:10:55 +0000

well, i’m firmly ensconced in the 25% regardless of deductions so time to put it on cruise control and check back at a later date. i had no idea what tax bracket i was in. This is probably a good thing to know and keep in mind going forward. thanks.

By: Chris

Chris — Wed, 17 Mar 2010 19:26:59 +0000

Yes. But it is hard to reduce your income enough to drop your tax bracket through a home biz yet still be able to make up for that difference in needed cash flow. At least for me. I need more ideas.

By: Kosmo @ The Casual Observer

Kosmo @ The Casual Observer — Tue, 16 Mar 2010 18:50:05 +0000

Your orginary income and long term capital gains are broken into two pieces and taxed separately.

By: Steven

Steven — Tue, 16 Mar 2010 16:46:18 +0000

IIRC, tax accounting software will account for income.

Lets rephrase into it SHOULD.

By: Ryan

Ryan — Tue, 16 Mar 2010 16:33:24 +0000

Jim, in regards to the capital gain tax. Using your example of John who makes $35K a year, but falls into the 15% tax braket after the standard deduction. That means his long term capital gains are not taxed, correct? Software like TurboTax accounts for this right? Or does it calculate your capital gains bracket before taking the standard deduction (which would then leave John in the 25% bracket and 15% capital gains braket)?

By: BibleDebt

BibleDebt — Tue, 16 Mar 2010 15:49:53 +0000

Always a confusing topic. The bracket you are actually in is only marginal, meaning only the last dollars are charged at that rate. So, if you are in the 25% tax bracket by $1, only that last dollar is taxed at 25%.

By: Robert Wasilewski

Robert Wasilewski — Tue, 16 Mar 2010 15:13:30 +0000

I second everything in this post. I cringe when I think of how much money Uncle Sam has at my expense because I was ignorant of the impact of taxes and many times treated found money casually. Many times people do this with inheritances etc. In my case, I was granted stock options years ago and sold them willy nilly without thinking of the tax impact.

By: WR

WR — Tue, 16 Mar 2010 14:36:34 +0000

Good Stuff!

The key is to reduce your income and raise your deductions. You want your AGI to be as low as possible.

Easiest and best way to reduce your income is to contribute to retirement plan. This has the added benefit of giving you some folding money for your retirement.

If John, from the example, reduces his AGI (Modified Adjusted Gross Income) by turning his passion into a home based biz and/or makes the max contribution to his 401(k), his tax bracket falls.

Startup Expenses, Operating Expenses and losses from a business are applied to your entire haul as are your 401(k)

You could also clean out your garage and give your stuff to Goodwill (Get a receipt and make a tax claim)

There are lots of other tax credits: Child, Education, Energy efficiency, Mortgage Interest Deduction…