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If you owe back taxes or need a different type of tax relief, it's helpful to work with an experienced tax attorney. While you don't need to be an expert, it's helpful to know a few facts when it comes to personal income tax. According to LegalJobs, the tax rate in the US ranges between 10% and 37%, depending on a person's taxable income. Here are a few more things to know about tax rates.
Not All of Your Income Is Taxed at the Same Rate
As a person's income increases, so too does their tax rate. However, only a part of your income is taxed at the highest rate. The U.S. utilizes a graduated tax rate which means that earnings in each bracket are paid at a certain rate. For example, if your highest tax rate is 37%, you'll only pay that rate for a part of your earnings.
It's Important to Know Your Overall Tax Rate for Correct Planning
When you're planning your annual tax strategy, you'll want to know your overall tax rate. This is the blended rate of the graduated rates that you pay on your earnings. Simply divide the amount of taxes you owe by your taxable income. Remember, if your earnings bump you up to the next bracket, you'll need to update your average tax rate. Fortunately, your tax professional can provide all the data you need to effectively plan your ongoing tax strategy.
Retirees Can Expect to Pay Taxes at a Lower Rate
As you're managing your retirement savings and overall strategy, you'll want to adjust your income tax rate for your retirement years. When you're retired and no longer working, your earnings will be limited to stock earnings, pensions, and other forms of passive income. If there's a large drop-off between those earnings and the money you were making during your working years, your tax rate could decrease significantly. This is another factor to consider when you're doing forward planning in preparation for retiring. If you plan to retire in the next few years, now's the time to find tax relief for any outstanding issues.
The Tax Doctors, LLC is here to help you find the tax relief you deserve. If you owe back taxes or are in need of another type of tax resolution, you can count on us. Contact our office today to schedule your free initial consultation.
