022 - How Does Our Tax System Work?

• Progressive tax bracket

1. 1. Everyone pays $1,905 on first $19,050 of taxable
   2. $140k taxes at $400k?
      1. 35% tax bracket
      2. Actual taxes = $91,379 (22.8% taxes)

Tax Rate

Taxable Income Bracket

10%

$0 to $19,050

12%

$19,051 to $77,400

22%

$77,401 to $165,000

24%

$165,001 to $315,000

32%

$315,001 to $400,000

35%

$400,001 to $600,000

37%

$600,001 or more

• Deductions 

1. 1. Standard deduction - $24,400
   2. Itemized - mortgage interest, state/local taxes, charitable giving, medical expenses over 7.5% of AGI

• Other considerations

1. 1. 1. States have separate tax brackets too
      2. Social Security @ 6.2% up to $132,900; Medicare @ 1.45% not capped 
      3. Different types of taxes for earned income, capital gains, dividends

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