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Federal Tax Brackets

Tax brackets are something that can become very confusing to some people as they are not always very clearly explained.

Tax brackets are sections or brackets where tax rates change only in a progressive tax system. Basically they are written out cutoff levels for taxable income. They show that income past a certain point will be taxed at a much higher rate than they would be at the lower rate. The amount of money that you made in a tax year determines the rate at which you will be taxed. If you make a very low amount of money you will be taxed less. However, if you make a very high amount every year you will be out into a higher tax bracket and you will pay more on that money than you would if you made less.

Look at it this way. If there are 4 tax brackets: 10%, 15%, 20%, and 25%. You pay 10% if your income is less than $10,000, you pay 15% if your income is between 10,001 and 20,000... and so on. So, if someone made $10,500 they would pay 10% taxes on the first 10,000 and 15% on that last 500 dollars.

These tax brackets are made to lower the tax load on those that are lower income and to increase the tax load slightly on those that have more income. By doing this it evens out the tax load in a way that lets people who have little money keep as much as possible but to tax those people more that can afford it. By taxing the low income families less it allows them to keep more money that they can then spend and put back into the economy. THose families that are higher income can afford to put money back into the economy even when they were in a higher tax bracket. THe IRS doesn't want to burden those lower income families to a point that they cannot use their money otherwise but still need to get a good amount of taxes each year so they tax more money more.

Although some people do not believe that these people should be taxed more simply because they make more it does help stabilize the economy especially in the kind of economy that we are currently in. Regardless of how you feel about the issue, the fact is that if you make more money you will pay more taxes regardless of the rate.

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