People often say, “I’m in the xx% tax bracket,” but does that mean all of their income is taxed at that rate? In this Elevate Wealth episode, Deanne Rosso and Ben Hall explain how tax brackets actually work—and clear up one of the most common misunderstandings about taxes.You’ll learn how the progressive tax system works, what marginal tax rates really mean, and why moving into a higher bracket doesn’t increase the tax rate on all your income.If you’d like help understanding where your “top slice” of income falls and what planning strategies may make sense for you, we’re always happy to help. Visit elevate-wealth.com and click Let’s Talk.#ElevateWealth #TaxBrackets #IncomeTaxes #TaxEducation #PersonalFinance #FinancialLiteracy #WealthAdvice #TaxPlanning
People might say I'm in the 10 or 12 or 22% tax bracket, but what does that really mean? The answer today on Elevate Wealth. Hey there, I'm Deanne Rosso, your host of Elevate Wealth. And today I have with me our director of tax services, Ben Hall. Hello, Ben. Hi, Deanne. Thank you for joining me today. So, Ben, can you walk us through how tax brackets actually work? Sure. There's a lot of confusion around tax brackets. Basically in the US we have a progressive tax system, and so what that means is your income is taxed in layers. Okay? So the first slice of your income is taxed at a lower rate, and then the next slices at a little bit higher rate and so on. And as your income increases you move up into the tax brackets. These are called your marginal tax rates. And so moving into a higher bracket doesn't make the earlier slices of your income jump. It's just applying to the the top slice of your income. So I think that's where a lot of the confusion comes in. Most people think if I start earning a lot more money, I'm going to be in a higher tax bracket. I'm going to pay a lot more in taxes. Well, really, it's just applying to that portion of your income that goes into that higher bracket. It's not applying the the higher rate to all of your income. So, that's where a lot of the confusion has been historically. It's just important to remember that it's not your entire income that goes into that higher higher rate. I think a good tip to remember is just knowing what top slice you're in, and what what your top bracket is that you're in, because that's going to play a part in managing your taxable income. For example, if you want to make retirement plan contributions that are going to lower your taxable income, it gives you a good idea of how much tax money you can save on the rate. Okay, that makes a lot of sense. I love how you describe that as layers, and that's how we should think about it when we earn our income, from a tax perspective, is in layers. And so thank you, Ben, because that's a really great analogy and a helpful explanation. And just remember that not all your income is taxed at that top layer. And any additional income you have would be taxed at what Ben just described as that top layer or that top slice. But that's what we're here for to help answer questions about taxes and your tax situation and your financial situation overall. So, if we can be of service or of help to you, please feel free to reach out to us. You can visit us at elevate-wealth.com and click let's talk and we'd love to connect with you. Thanks so much for tuning in and we will see you next time.
