Friday, April 19, 2013

Tax Brackets and Tax Rates

Do you know what your tax rate is? 

That’s a trick question as you really have two tax rates:  1) your Marginal Tax Rate and 2) your Effective Tax Rate.

To understand each, you need to understand our tax system. The U.S. tax system is not based on a single tax rate, but rather a series of tax rates known as tax brackets based on your amount of taxable income. Everyone pays the same tax rates at each income level, and the more taxable income you have, the higher your tax rate.