# tax bracket

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Related to tax bracket: Marginal Tax Bracket

## Tax bracket

The percentage of tax obligation for a particular taxable income.

## Marginal Tax Rate

A percentage of one's income that one must pay in taxes. Marginal tax rates vary according to income levels. One who makes \$100,000 per year has a higher marginal tax rate than one who makes \$25,000. However, the marginal tax rate does not increase for one's entire income, merely each dollar over a certain threshold. Suppose one pays 10% of one's income up to \$25,000, and 20% thereafter. The taxpayer making \$25,001 does not suddenly have to pay 20% of his/her entire income, only on the one dollar over \$25,000. That is, he/she owes 10% of \$25,000 (\$2,500) and 20% of the \$1 over that (or \$0.20). All things being equal, this taxpayer owes \$2,500.20 in taxes.

## Tax bracket.

A tax bracket is a range of income that is taxed at a specific rate.

In the United States there are six brackets, taxed at 10%, 15%, 25%, 28%, 33%, and 35% of the amount that falls into each bracket.

For example, if your taxable income was high enough to cross three brackets, you'd pay tax at the 10% rate on income in the lowest bracket, at the 15% rate on income in the next bracket, and at the 25% rate on the rest.

The rates remain fixed until they are changed by Congress, but the dollar amounts in each bracket change slightly each year to adjust for inflation.

In addition, the income that falls into each bracket varies by filing status, so that if you file as a single taxpayer you may owe more tax on the same taxable income as a married couple filing a joint return.

## tax bracket

The highest marginal tax rate to which a person or estate will be subject.Income taxes and estate taxes are calculated as a percentage of adjusted gross income, but the percentage increases as income increases. One's income is divided into brackets with an upper and lower limit to each bracket;the income within the bracket is taxed at its appropriate percentage rate,and then the next bracket is taxed at a higher percentage rate. See marginal tax rate.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.

## Tax Bracket

The rate at which income at a particular level is taxed.
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THE new pension freedoms that come into operation in April next year could push lots of us into higher-rate tax brackets.
Basically, income smoothing strategies involve (1) reducing taxable income in high-income years by maximizing deductions and shifting income to lower-income years; and (2) increasing income in low-income years by deferring deductions and increasing taxable income to fill up the lower tax brackets. Put another way, the idea is to "fly below the radar," i.e., to keep taxable income below the 3.8% net investment income tax applicable threshold level, and, if that is not possible, to keep taxable income below the PEP and Pease applicable threshold, and, if that is not possible, to keep taxable income below the 39.6% tax bracket.

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