Quick Tips for Determining Your 2017 Federal Tax Bracket
Your federal tax bracket determines the percentage of taxes you owe to the federal government each year according to how much taxable income you take in.
The tax bracket, which is drawn out in a table, tells you what percentage you owe and approximately how much you will be paying. However, many people don’t realize that your tax bracket doesn’t reflect the percentage of your income that you will pay in taxes. The actual amount is configured using a formula after your annual tax filing is completed.
In the mean time, finding your federal tax bracket helps you estimate what you will be paying by the time it’s all said and done.
Here are some quick tips for determining your 2017 federal tax bracket:
1. Income Estimation:
The first part of the process is estimating your income properly with the right IRS form. For example, there are 1040s, 1040EZs, and 1040As that rely on meeting certain conditions, like having less than $100,000 in taxable income and so forth. It’s recommended that you review the IRS website for starting out with the right form – it’ll save you a lot of time.
2. Adjusted Gross Income:
Your adjusted gross income is another term for what you make in a year, with pre-tax adjustments deducted, like IRA or 401K contributions. Calculate the adjusted gross income before you start reviewing your deductions.
This is the fun part. It’s time to count as many deductions as possible to lower your taxable income. If you don’t plan to itemize the deductions, determine the deduction amount based on IRS standards. Sit down and take the time to mull over expenses, like charitable contributions, that will be applied here. Then, deduct them from your adjusted gross income.
4. Filing Status:
Now that you’re at your taxable income, you need to select an option as single, married, or head of household. What you choose for this section has an incredibly important influence on the final selection of your tax bracket.
5. Bracket Time:
Once all of that has been completed, based on the tax bracket table, you can see where you are going to fall and with what taxing percentage for the year ahead. For example, in 2016, if you registered as a single person or married person filing separate from your spouse, your taxable income was less than $9,075, falling in the 10% bracket. However, if your taxable income was between $405,100 and $406,750, then your tax bracket was 35%. There are completely separate brackets for your filing status, like if you were filing jointly with your spouse.
Though the formula still needs to go through before you see the actual final federal taxation amount, this table will help you get a very realistic idea of what your tax bracket and subsequent taxation percentage is for this year.
If you’re unhappy with the results, be sure to take time with your deductions, deducting as much money as possible from the taxable income by the end of the process.