My Investing Notebook :: Learning from the pros; making decisions on my own. ::

Some information about taxes, which I found-out about recently. I thought that if you are in a 25% tax-bracket and you make, let’s say, $60K, you would pay $15,000 (25% * 60K) in taxes (oh, that seems a lot). Fortunately, it does not work that way: if you’re married (similar if you’re single, only the numbers change — see below for your bracket), you pay 15% for the first $56,800 (bracket below 25%), and pay 25% on $3,200 (60K – 56,800); so that comes out to $9320 ($8520 + $800) — still a lot but better than $15K!

Another, similar, misconception (I thought that way also) is the notion that your tax will suddenly increase by a huge amount when you move into a higher tax bracket. For example, if your taxable income is in the 15% bracket, but just a few dollars below the 27% bracket, you might be concerned that earning a few dollars more will cause you to pay a lot more in tax. Relax. The first $100 dollars you earn in the 27% bracket will cause your tax to increase by $27. You still pay only 15% on all the money you earned below the 27% bracket.

Here are current, 2003, tax brackets.
If you’re single, see your tax bracket here.

See a whole article (where I got the information from) here.