![]() ![]() Not only do progressive income taxes allow low earners to keep more of their income, but income taxes also go to pay for many programs that help lower-income individuals financially. Someone who is earning six figures is likely to have more wiggle room in their budget than someone who is living at the poverty line and is barely scraping by. Proponents of a progressive income tax system point out that the higher someone’s income, the more they can afford to contribute toward income taxes. Other itemized deductions are available to specific individuals, such as those people who have paid student loan interest, donated to charity, or contributed to an individual retirement account (IRA). ![]() (In 2023, the standard deduction will be increased to $13,850). The 2022 standard deduction, which is available to all taxpayers, reduces someone’s taxable income by $12,950. The United States also has plenty of tax deductions that can help individuals to lower their taxable income and move them into a lower tax bracket. Your adjusted gross income takes into account certain deductions that can help you to lower your taxable income. In the United States, your marginal tax rates are based on your adjusted gross income, not your actual income. ![]() This system helps to ensure that an increase in income doesn’t unfairly impact taxpayers and that no one is paying more than their fair share in taxes. Those earning between $10,276 and $41,775 pay a marginal tax rate of 12%, but only on the income in that range. For example, everyone pays a tax rate of 10% on the first $10,275 of their income. The United States uses marginal tax rates, meaning each income tax rate only applies to a certain portion of your income. Here is a breakdown of the progressive income taxes in the United States, based on the income of a single individual in 2022 (for taxes due in spring 2023): ![]() Those making more than $539,900 pay a 37% tax on the portion of their income that falls above that threshold. As of 2022, those individuals with an income of $10,275 or less pay only a 10% tax on their income. The United States has a progressive income tax system with seven different tax brackets ranging from 10%–37%. So the higher someone’s income, the higher the tax rate they pay the lower someone’s income, the lower the tax rate they pay. In a progressive tax system, the percentage that someone pays in taxes increases as their income increases. ![]()
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