Did you know that if you are in the 25% tax bracket you do not pay 25% tax on your income?
Think about this for a second. In 2016 a married couple who made $75,300 would be in the 15% tax bracket. That would mean you would owe taxes of $11,295 ($75,900 X .15).
But, if you made $1 more in the year or $75,301, you would jump up to the 25% tax bracket. That would mean you would owe taxes of $18,825 ($75,901 X .25).
You would keep $64,005 if you made $75,300.
But you would only keep $56,475 if you made $1 more.
If our tax system worked this way there would be no incentive to work harder and make more money?
I’ve had conversations with officers who didn’t want to work more overtime because it would put them in a higher tax bracket. Luckily this is not how our tax system works. Continue reading