Then I went to the irs website and looked at the tax tables there and found that taxes owed go up gradually percentage wise as a person makes more money.
My question is: Are the tax rates from the first link I gave only used for people who are estimating their taxes due?
The reason I ask is: I make borderline the cutoff between the 15% and 25% rates shown and would want to act if it meant the difference between paying 10% less on taxes.
My guess is: I should just go by the tax tables to estimate what I will be taxed come January.
My new guess is: We are taxed at different rates for certain levels of our income.
the first $7300 a single guy makes is taxed at 10% the 7301st dollar is then taxed at 15% and this goes on until he makes his 29,700th dollar, where he will then start being taxed at 25% for each dollar until he breaks the next tax bracket and so on.
Yes you are essentially correct. It is a graduated scale so that dollars earned over each bracket line are taxed at a higher rate, but no one pays more for the dollars earned below each break point.
For this reason overtime hours and bonus pay will often have more withholding on a percentage basis. This is assuming that those dollars will be taxed at the higher rate. A big misconception is that paychecks with overtime hours on them may all have the higher rate of withholding and people assume that this means they are going to have to pay more taxes on all the money. Some people think that they shouldn't work overtime because it will make them net less money... this is simply not true. It is just the way payroll companies operate the withholding of tax dollars on checks. At the end of the year it will only be overtime and bonus compensation that slide up into the higher bracket. Your base pay will always be taxed at the rate that you fit into.
Posts: 3062 | Location: USA | Registered: 06-04-02
thank you for your reply. I was beginning to wonder if it would be answered. You also answered another question of mine as well considering overtime pay and witholding per check basis.
