Ah, tax season — it's the best of times and the worst of times. Yeah, the idea of potentially getting extra money back is a joy and all, but filing taxes can be totally confusing, especially if you're new to it. For one, there's just way too many forms, and what happens if you make a small mistake? Not to mention the really big questions like: what the heck is a tax bracket and how do you find yours? The best news is that there are guides out there to help you out. Here's how to find your tax bracket before you give yourself a headache.
For starters, let's quickly gloss over what a tax bracket even is. Per Turbo Tax, it's the absolute highest rate charged on your income. There are seven of them — 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent —and they depend on taxable income and your filing status, per Nerd Wallet. Whether you're a single filer, married and filing jointly with your partner, or married and filing separately, Nerd Wallet has tables on its website that show the tax brackets that apply to the 2018 tax year, as well as 2019's and 2020's. Take a look at them here and then come back.
See? So, for example, if you are a single filer for the 2018 tax year and your taxable income is $157,501 to $200,000 (first, please adopt me), the highest bracket you are subject to is 32 percent since your income is within that bracket range.
Still need further clarity or have any additional questions? Turbo Tax came through with a really insightful video on this that should help you out:
Another thing you might have on your mind is whether you'll be able to catch a tax cut, which depends on — wait for it — your tax bracket. An analysis by the Tax Policy Center says that American taxpayers from all brackets are expected to see a 1.7 percent increase in after-tax income as a result of the cuts for the 2018 tax year (being processed in 2019). If you're the owner of a lucrative company the tax cuts could be significant, but if not, you might not want to get too excited. The benefits to individual, low-income taxpayers will reportedly phase out over the next few years, at which point rates will start to increase again.
"To be sure, the middle class gets help temporarily," a report from the The Brookings Institution reads, "but over the longer run, the middle class will be worse off."
Well, you've got quite some time to get all of this squared away. The last day to file taxes is Monday, April 15 and you can possibly get an extension if you find yourself in a bind. Or, if filing is just too daunting and complicated of a task, you can always reach out to sources like Turbo Tax, H&R Block or Free Tax USA for help.
Best of luck with your taxes!