New Power Generation Inc .
NPG Financial Services Inc.
7726 Winegard Rd, Suite 17
Orlando, FL 32809
(407) 929-1684
npgfs1@gmail.com chrislopez@npglife.us

Tax Read Time: 3 min

Understanding Marginal Income Tax Brackets

By any measure, the tax code is huge. It is over 2,000 pages long, and even longer with footnotes.1

And almost weekly, the Internal Revenue Service publishes a 20- to 50-page bulletin about various aspects of the tax code.2

Fortunately, it's not necessary to wade through these massive libraries to get a basic understanding of how income taxes work. Knowing a few key concepts may provide a solid foundation.

One of the key concepts is marginal income tax brackets.

Taxpayers pay the tax rate in a given bracket only for that portion of their overall income that falls within that bracket's range.

Tax Works

Seeing how marginal income tax brackets work is helpful because it shows the progressive nature of income taxes. It also helps you visualize how your total tax rate can be calculated. But remember, this material is not intended as tax or legal advice. Please consult a tax professional for specific information regarding your individual situation.

How Federal Income Tax Brackets Work

Say a married couple, filing jointly for the 2022 tax year, had a taxable income of $200,000. Each dollar over $178,150 – or $21,850 – would fall into the 24% federal income tax bracket. However, the couple's total federal tax would be $35,671 – about 18% of their adjusted gross income.

This is a hypothetical example used for illustrative purposes only. It assumes no tax credits apply.

2022 Federal Income Tax Brackets

Your federal income tax bracket is determined by two factors: your total income and your tax-filing classification.

For the 2022 tax year, there are seven tax brackets for ordinary income – ranging from 10% to 37% – and four classifications: single, married filing jointly, married filing separately, and head of household.3

1. Investopedia.com, 2021
2. IRS.gov, 2022
3. IRS.gov, 2022

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Share |
 

Related Content

What Is My Risk Tolerance?

What Is My Risk Tolerance?

This questionnaire will help determine your tolerance for investment risk.

Spend Mindfully by Adopting a Saver’s Mentality

Spend Mindfully by Adopting a Saver’s Mentality

As we have all been forced to change our behaviors and depart from our “normal” routines, it is no wonder that our spending behaviors have changed too.

Tax Freedom Day

Tax Freedom Day

Assess how many days you'll work to pay your federal tax liability.

 

Have A Question About This Topic?







Thank you! Oops!

4 Things to Consider While You’re Planning When to Retire

As the decision to retire approaches, you’ll find the choice of when to retire is rarely black and white.

Assess Life Insurance Needs

How to help determine life insurance needs to provide for your family after you pass away.

Tax-Advantaged Health Care Planning for Retirement

Heading into retirement with confidence is easier if your planning includes steps to minimize taxes, especially as it relates to health care planning.

View all articles

Comparing Mortgage Terms

Estimate the total cost in today's dollars of various mortgage alternatives.

Paying Off a Credit Card

Enter various payment options and determine how long it may take to pay off a credit card.

Taxable vs. Tax-Deferred Savings

Use this calculator to compare the future value of investments with different tax consequences.

View all calculators

Your Cash Flow Statement

A presentation about managing money: using it, saving it, and even getting credit.

Principles of Preserving Wealth

How federal estate taxes work, plus estate management documents and tactics.

5 Smart Investing Strategies

There are some smart strategies that may help you pursue your investment objectives

View all presentations

Coaches

Coaches have helped you your whole life, in ways big and small. We’d like to be one of them.

Retirement Redefined

Around the country, attitudes about retirement are shifting.

Charitable Giving: Smart from the Heart

Do you have causes that you want to support with donations?

View all videos