Finding tax bracket
How can my husband and I determine our tax bracket? Except for $300 from social security, our income is unearned and taxed at about $2,000 a year -- a difficult burden, as we try to remain independent of government handouts. We are considering but are not happy about the prospects for tax-free bonds with inflation threatening ahead. -- N.P.
By tax bracket, I assume you are interested in knowing your marginal or top bracket. That is, what percentage do you pay in taxes on the last increment of income? First, find taxable income after adjustments, exemptions and deductions , Form 1040 (Schedule TC, Part 1, line 3). From a tax rate table determine where your taxable income falls and read the additional percentage rate applicable. For example, if you are married, filing jointly and your taxable income is over $11,900 but less than $16,000, you would pay $1,404 on the $11, 900. In this example, your top or marginal tax rate is 21 percent.Different tax schedules apply for single, married but filing jointly and head of household. Thus, marginal tax rates differ for the same taxable income according to your filing status. Tax rate schedules are available on the back cover of Publication 17, "Your Federal Income Tax" (available free from IRS offices) or in numerous other IRS publications including the instructions accompanying your Form 1040.