Investor Glossary-tax bracketInvestor Glossary-tax bracketInvestor Glossary-tax bracketInvestor Glossary-tax bracketInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Tax Bracket

The HTML to link to this page
 

A tax bracket is the rate of income tax an individual must pay if their income falls within a specific income range. The progressive tax rate used in the United States tax system creates the need for a tax bracket to be assigned to a particular yearly income range. A progressive tax bracket is designed so that those who make less income are taxed at a lower percentage than those who have a higher income. Tax rates and the accompanying tax bracket for a specific income changes from time to time as new tax laws are enacted. However, to better understand the purpose of a tax bracket consider this illustrative example. An individual with a yearly income of $65,000 would fall into the 25 percent tax bracket. This tax bracket includes incomes from $34,001 to $82,400. Taxes for this individual would be calculated using the rates for each tax bracket that it passes through. The first $8,375 will be taxed at 10 percent (0-$8,375 tax bracket). The next $25,625 will be taxed at 15 percent ($8,376-$34,000 tax bracket). Finally, the remaining income of $31,000 ($65,000 - $34,000) will be taxed according to the 25 percent tax bracket.



Rate this tax bracket definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: in escrow, FTSE, EBITDA, FICO score, 401a, reverse mortgage, liquidity ratio, average price per share, phantom income, cancelled check, 144a, retained earnings, inflation, class C shares, LIBOR, diluted share, Key Rate Duration, APR, command economy, minority interest, option premium, balance sheet, ex-dividend, VIX, stock split, risk management, debt service coverage, implied volatility, real GDP, deferred revenue, 1035 exchange, required rate of return, quality assurance, covered put, stock market close, ex-dividend date, labor relations, annual return, Zero Cost Collar, current ratio, dividends payable, 1031 exchange, limit order, open position, per diem, margin rate, irrevocable trust, deferred tax, wholly-owned subsidiary


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use