Profitt Report: Many U.S. taxpayers don't know their tax bracket
This year’s tax deadline is Tuesday, April 17. If you’re paying taxes every year, you might as well know how much it’s costing you, right? Nearly half of Americans don’t know how much they’re paying according to a survey by Nerd Wallet.
“I think people don't understand tax brackets,” said Rebecca Millsap, CPA of Yeo and Yeo in Flint Twp.
Millsap said, just because you fall into a certain tax bracket, doesn’t mean every penny you make is taxed at that amount. Here’s how it breaks down:
The more you make, the higher your tax rate. However, this is important: your income isn’t all taxed at one rate. Take a single filer who made $20,000 last year. Their first $9,525 are taxed in the first, smallest bracket, which is 10 percent. The rest his or her income will be taxed at the next highest bracket, which is 15 percent.
To make this more confusing, new tax reform laws are now in effect, meaning the taxes you file in 2019 will be different. The system works the same, but the brackets shifted. The top bracket in 2017, 39.6 percent, dropped to 37 percent as of this year. Most of the other brackets dropped by a few percentages as well.
“People should be paying less taxes in 2018 and people have probably already seen that happen in their paychecks because in February, the new tax brackets came into effect for payroll purposes and they're now being applied to your paycheck, so people are getting more in take-home pay,” said Millsap.
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