The Different Categories Affecting Your Tax Rate Chart

There are many different categories that affect your tax rate chart. Your individual tax rate is affected by your individual federal and state tax rates and deductions and credits. Your tax rate is the amount that you pay which is less than the stated tax table rate that is published by the IRS.

For example the tax table for 2008 is as follows:

  • $0 to $8,025, 10 percent tax rate;
  • $8,025 to $32,550, 15 percent tax rate;
  • $32,550 to $78,850, 25 percent tax rate;
  • $78,850 to $164,550, 28 percent tax rate;
  • $164,550 to $357,700, 33 percent tax rate; and,
  • $357,700 and above, 35 percent tax rate.

If your earned income in 2008 was $50,000, you would be in the 25th percentile tax bracket.  Your actual tax rate for 2008 would have been 17.69 percent, determined as follows:

($8,025 less $0) $8,025 × .10 = $802.50
($32,550 less $8,025) $24,525 × .15 = $3,678.75
($78,850 less $32,550) $17,450 × .25 = $4,362.50

Therefore: $802.50 + $3,678.75 + $4,362.50 = $8,843.75 (17.69 percent)

The different tax brackets helps to determine your tax rate. This amount is further impacted by any additional amounts you may owe on the state level. It can also be reduced by any deductions that you are allowed to take to lower your income or credits used to reduce your tax amount.

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