A Brief Study of Taxes - Part 2
Yesterday I posted a short bit comparing the taxes of two different families (Married filing jointly). Today I'll show you how the taxes are computed. It is really simple as long as you know what the different brackets are. Also, it helps to have excel so that you can program it to compute them for you.
First, here is a list of the income tax brackets for 1998 - 2005 (1999 is excluded because I couldn't find the info if you have access to this information, please send it to me):
2005
$0 $14,600 10%
$14,601 $59,400 15%
$59,401 $119,950 25%
$119,951 $182,800 28%
$182,801 $326,450 33%
Greater Than $326,450 35%
2004
$0 $14,300 10%
$14,301 $58,100 15%
$58,101 $117,250 25%
$117,251 $178,650 28%
$178,651 $319,100 33%
Greater Than $319,100 35%
2003
$0 $14,000 10%
$14,001 $56,800 15%
$56,801 $114,650 25%
$114,651 $174,700 28%
$174,701 $311,950 33%
Greater Than $311,950 35%
2002
$0 $12,000 10%
$12,001 $46,700 15%
$46,701 $112,850 27%
$112,851 $171,950 30%
$171,951 $307,050 35%
Greater Than $307,050 39%
2001
$0 $45,200 15%
$45,201 $109,250 28%
$109,251 $166,500 31%
$166,501 $297,350 36%
Greater Than $297,350 39%
2000
$0 $43,850 15%
$43,851 $105,950 28%
$105,951 $161,450 31%
$161,451 $288,350 36%
Greater Than $288,350 40%
1998
$0 $42,350 15%
$42,351 $102,300 28%
$102,301 $155,950 31%
$155,951 $278,450 36%
Greater Than $278,450 40%
Now I'll show you how to calculate the taxes due for a family. For this exercise, we will assume that this household has a taxable income of $60,000 and they are going to file "married filing jointly." We will calculate the tax for the 2005 year.
2005
$0 $14,600 10%
$14,601 $59,400 15%
$59,401 $119,950 25%
$119,951 $182,800 28%
$182,801 $326,450 33%
Greater Than $326,450 35%
Looking at the bracket chart you can see that the first $14,600 of the $60,000 will be taxed at 10%, which is $1,460. The next $44,800 ($59,400 - $14,600) will be taxed at the 15% rate which comes to $6,720. The remaining $600 will be taxed at the 25% rate for a tax of $150. Adding them together, we get a total tax bill of $8,330 ($1,460 + $6,720 + $150 = $8,330).
So, there you have it. Hopefully I made it easy enough to understand. The hardest part is getting to the taxable income figure. Maybe I'll cover that someday.
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