2017 Tax Bracket Breakdown

2017 Tax Bracket Breakdown

The United States uses a progressive tax system, which means different portions of your income are taxed at different rates. In most cases you pay a higher overall tax rate if you have a higher taxable income.

Tax brackets are the physical representation of this system and show how much you have to pay at various income levels. Since tax brackets and rates periodically change, make sure you are using accurate tables when filing your taxes.

Every year, the Internal Revenue Service (IRS) gives notice well in advance of what the tax brackets will be when you file your taxes. Twenty seventeen is an unusual case, since some believe that tax reform could change the tax structure between now and the end of the year. That said, the 2017 tax brackets are available as defined under current law, and using these brackets as a starting point is essential.

For more detailed information on the 2017 Tax Bracket Breakdown provided by the IRS please visit this link:

https://www.irs.gov/uac/newsroom/in-2017-some-tax-benefits-increase-slightly-due-to-inflation-adjustments-others-are-unchanged

There are, however, some areas in which people get confused with tax brackets. First, the tax bracket that you are in does not necessarily apply to all of your income. For example, if you are single with taxable income of $40,000, you are in the 25% bracket, but you only paid tax at a 25% rate on the last $2,050 you earned. The rest was taxed at lower rates of 10% or 15%.

Keep in mind that the starting point for these brackets is taxable income, and that is typically much different from your gross income from all sources. In particular, taxable income takes your personal exemptions into account, as well as either the standard deduction or your itemized deductions.

Knowing your tax bracket can give you valuable information for your tax planning because your tax bracket also applies to any additional income you would earn. If, however, tax reform does come sooner rather than later, then you will have a better idea of whether new laws will be of benefit to you or not.

(sources: http://www.forbes.com/sites/kellyphillipserb/2016/10/25/irs-announces-2017-tax-rates-standard-deductions-exemption-amounts-and-more/#691fd91e387a, http://www.savingtoinvest.com/federal-irs-tax-brackets-tax-rates-and-other-tax-updates/, https://www.fool.com/retirement/2017/02/06/what-are-the-2017-tax-brackets.aspx)

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