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Tax Bracket

Definition

Tax brackets are the divisions at which tax rates change in a progressive tax system. Essentially, they are the cutoff values for taxable income — income past a certain point will be taxed at a higher rate.

What is a 'Tax Bracket'

A tax bracket refers to a range of incomes that are subject to a certain income tax rate. In most income tax systems, low incomes fall into tax brackets with relatively low income tax rates, while higher earnings fall into brackets with higher rates. Tax brackets help create progressive income tax schedules.

How Do Tax Brackets Work?

Single filers who have less than $9,275 in 2016 taxable income fall into the lowest tax bracket and their incomes are subjected to a 10% income tax rate. Single filers who earn more than this amount have their first $9,275 in earnings taxed at 10%, but their earnings past that cutoff point and up to $37,650 are subjected to a 15% rate. Earnings between $37,650 and $91,150 are taxed at 25%, and additional income is taxed at the rate of the bracket into which it falls. As a result, tax filers often fall into more than one tax bracket.

What Is the Difference Between Tax Rates and Tax Brackets?

A tax rate is the percentage at which income is taxed, and each tax bracket has a different tax rate. Casually, people often refer to their tax brackets and their tax rates as the same thing, but as most individuals have income that falls into multiple tax brackets, this comparison is not accurate. Rather, an individual's effective tax rate can be determined by looking at the total amount of tax paid as a ratio of his income.

Tax Brackets and Progressive Taxation

Tax brackets yield a progressive tax system, in which taxation progressively increases as an individual's income grows. This contrasts with a flat tax structure, in which all individuals are taxed at the same rate, regardless of their income levels.

Explaining 'Tax Bracket'


Further Reading


THE RELATIVE PRICING OF TAX-EXEMPT AND TAXABLE DEBT.
elibrary.ru [PDF]
… 0508 - ECONOMICS, FINANCE … analysis concludes that because the ratio of yields (tax-exempt to taxable) rises with maturity, the marginal tax brackets of the … banking system''s ability to arbitrage the two bond markets is a very strong influence on the marginal tax bracket at work …

TAXES, INFLATION, AND THE EQUILIBRIUM BETWEEN THE RENTAL HOUSING MARKET AND THE OWNER OCCUPIED HOUSING MARKET.TAXES, INFLATION, AND THE EQUILIBRIUM BETWEEN THE RENTAL HOUSING MARKET AND THE OWNER OCCUPIED HOUSING MARKET.
elibrary.ru [PDF]
… 0508 - ECONOMICS, FINANCE … analysis concludes that because the ratio of yields (tax-exempt to taxable) rises with maturity, the marginal tax brackets of the … banking system''s ability to arbitrage the two bond markets is a very strong influence on the marginal tax bracket at work …

Taxation, corporate financial policy, and the cost of capitalTaxation, corporate financial policy, and the cost of capital
www.sciencedirect.com [PDF]
… 0508 - ECONOMICS, FINANCE … analysis concludes that because the ratio of yields (tax-exempt to taxable) rises with maturity, the marginal tax brackets of the … banking system''s ability to arbitrage the two bond markets is a very strong influence on the marginal tax bracket at work …

Tax distortions to the choice of organizational formTax distortions to the choice of organizational form
www.sciencedirect.com [PDF]
… 0508 - ECONOMICS, FINANCE … analysis concludes that because the ratio of yields (tax-exempt to taxable) rises with maturity, the marginal tax brackets of the … banking system''s ability to arbitrage the two bond markets is a very strong influence on the marginal tax bracket at work …

Banks, firms and the relative pricing of tax-exempt and taxable bondsBanks, firms and the relative pricing of tax-exempt and taxable bonds
www.sciencedirect.com [PDF]
… 0508 - ECONOMICS, FINANCE … analysis concludes that because the ratio of yields (tax-exempt to taxable) rises with maturity, the marginal tax brackets of the … banking system''s ability to arbitrage the two bond markets is a very strong influence on the marginal tax bracket at work …

Taxation and corporate payout policyTaxation and corporate payout policy
pubs.aeaweb.org [PDF]
… 0508 - ECONOMICS, FINANCE … analysis concludes that because the ratio of yields (tax-exempt to taxable) rises with maturity, the marginal tax brackets of the … banking system''s ability to arbitrage the two bond markets is a very strong influence on the marginal tax bracket at work …

Corporate finance and taxes: a reviewCorporate finance and taxes: a review
www.jstor.org [PDF]
… 0508 - ECONOMICS, FINANCE … analysis concludes that because the ratio of yields (tax-exempt to taxable) rises with maturity, the marginal tax brackets of the … banking system''s ability to arbitrage the two bond markets is a very strong influence on the marginal tax bracket at work …

Taxes, market valuation and corporate financial policyTaxes, market valuation and corporate financial policy
www.jstor.org [PDF]
… 0508 - ECONOMICS, FINANCE … analysis concludes that because the ratio of yields (tax-exempt to taxable) rises with maturity, the marginal tax brackets of the … banking system''s ability to arbitrage the two bond markets is a very strong influence on the marginal tax bracket at work …

Financial leverage clienteles: Theory and evidenceFinancial leverage clienteles: Theory and evidence
www.sciencedirect.com [PDF]
… 0508 - ECONOMICS, FINANCE … analysis concludes that because the ratio of yields (tax-exempt to taxable) rises with maturity, the marginal tax brackets of the … banking system''s ability to arbitrage the two bond markets is a very strong influence on the marginal tax bracket at work …



Q&A About Tax Bracket


What is the highest income level for single filers in 2018?

91,150.

What is the lowest income level for single filers in 2018?

9,275.

What is a tax bracket?

A tax bracket refers to a range of incomes that are subject to a certain income tax rate.

How many different levels of income does each individual have to pay taxes on in 2018?

Three different levels of taxation exist depending on an individual's earnings. The first 9,275 dollars earned are taxed at 10%, earnings between 37,650 and 91,150 dollars are taxed at 15%, and all additional earnings are taxed at 25%. As a result, individuals often fall into more than one category when paying their taxes. This means they must calculate their effective tax rate based on the total amount paid as a ratio of their total taxable income.

How do tax brackets help create progressive income taxes?

Tax brackets help create progressive income taxes by having low incomes fall into lower tax rates and higher incomes fall into higher rates.

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