What is the Difference Between a Tax Rate and a Tax Bracket?
Your tax rate refers to the percentage of your income, when all deductions have been taken, that will go to pay taxes. The tax bracket takes into consideration your filing status, tax rate and income range. The bracket will indicate how your income is taxed based on varying levels as it increases.
Amherst, NH Resident Seeks Clarity
A resident in Amherst was confused by the difference between his tax rate and tax bracket. To clarify this, he contacted the experts at Merrimack Tax Associates.
Understanding the Tax Bracket
The tax bracket sets how your income is taxed, at varying levels, as it increases. This lays out the different tax rates based on how you are filing, including single filers, married filing separately, married filing jointly and head of household. For 2019 this bracket is also comprised of six income brackets.
Your tax rate increases with your income. However, you are not taxed at this higher rate for all of your earned income. Based on what the bracket outlines for your filing status, you will be taxed at the lower rate for the first amount of earned income, growing exponentially as your income increases. This higher income will be taxed at the higher designated tax rate for you.
How Your Tax Bracket Affects Your Tax Rate
If your filing status changes, this will affect your tax rate. Income levels vary by tax rate, depending on this filing status. Referring to the tax bracket can also help you to determine if it would be more advantageous to file married jointly or separately.
A tax expert can better help you to understand how the tax bracket and its corresponding rates will personally apply to you. With this new education, the Amherst resident has scheduled an appointment with Merrimack Tax Associates to ensure that he is on the best course for filing his taxes.
Set up an appointment with Merrimack Tax Associates’ professionals to answer your tax questions. Call today (603) 429-2009.