2014 Tax Brackets: Surprise -- You Have More than One

By Markets Fool.com


Photo: Flickr user John Morgan.

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The 2014 tax brackets look much like most years' tax brackets: A chart with several columns, lots of numbers, and a few percentage rates. They don't look that complicated -- and yet many people still misunderstand them.

For example, if you're in the 28% tax bracket, you might grumble thinking that all your income is being cut by 28%. You might be afraid to earn a few more bucks, lest it kick you into the next tax bracket and cost you a lot of money. That's not how it all works, though, because your tax rate probably isn't what you're assuming it is.

The 2014 tax brackets

First, here's a look at the tax bracketsfor 2014:

Tax Bracket

Single Filer

Married Filing Jointly or Qualifying Widow/Widower

Married Filing Separately

Head of Household

10%

On taxable income up to $9,075

On taxable income up to $18,150

On taxable income up to $9,075, plus

On taxable income up to $12,950, plus

15%

On On taxable income from $9,076 to $36,900

On taxable income from $18,151 to $73,800

On taxable income from $9,076 to $36,900, plus

On taxable income from $12,951 to $49,400, plus

25%

On taxable income from $36,901 to $89,350

On taxable income from $73,801 to $148,850, plus

On taxable income from $36,901 to $74,425, plus

On taxable income from $49,401 to $127,550, plus

28%

On taxable income from $89,351 to $186,350

On taxable income from $148,851 to $226,850, plus

On taxable income from $74,426 to $113,425, plus

On taxable income from $127,551 to $206,600, plus

33%

On taxable income from $186,351 to $405,100

On taxable income from $226,851 to $405,100, plus

On taxable income from $113,426 to $202,550, plus

On taxable income from $206,601 to $405,100, plus

35%

On taxable income from $405,101 to $406,750

On taxable income from $405,101 to $457,600, plus

On taxable income from $202,551 to $228,800, plus

On taxable income from $405,101 to $432,200, plus

39.6%

On taxable income of $406,751 or more

On taxable income of $457,601 or more

On taxable income of $228,801 or more

On taxable income of $432,201 or more

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Photo: Flickr user Phillip Ingham.

Don't make the mistake of thinking that if you're single and earn between $36,901 and $89,350, then you face a 25% tax on all your income. If you're a single filer with $50,000 in taxable income, you are in the 25% tax bracket -- but you're also in the 10% and 15% brackets.

A close look at the whole column for single filers shows that the first $9,075 of your income is taxed at just 10%, and the next $27,825 is taxed at 15%. It's only the income above $36,900 that's taxed at 25%. According to IRS-provided tax tables, a single filer earning $50,000 in 2014 will face a total tax of $8,363. Divide $8,363 by $50,000 and you'll get 0.17, or 17%. Thus the effective tax rate for that person is 17%, not 25%.

So don't go envying someone in the 15% tax bracket, because you're in it, too. And if you hear anyone grumble about being in the 39.6% tax bracket, know that it's only his or her income above $406,750 that's being taxed at that rate.

At TaxAct.com, you can enter various taxable incomes and see which 2014 tax brackets apply and what their overall effective tax rate is. For example, someone earning $250,000 will be in the 33% bracket, but their effective tax rate will be 26.5%.

So go ahead and review the 2014 tax brackets, but do so knowing the difference between your tax brackets and your actual effective tax rate.

The article 2014 Tax Brackets: Surprise -- You Have More than One originally appeared on Fool.com.

Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter,has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.