Tax Guide |
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For 2014, the seven individual tax rates are 10, 15, 25, 28, 33, 35 and 39.6 percent. Each succeeding rate applies to a tier of your income. For example, a certain amount of your income is taxed at 10 percent, then a certain amount of income above that is taxed at the 15 percent rate, and so on. The 39.6 percent rate applies to unmarried taxpayers whose taxable income is over $406,750 and married taxpayers who file jointly whose taxable income is over $457,600.)
Your filing status is the first item you need to complete on your tax return, after your name, address, and Social Security number. This is appropriate, because your filing status is the starting point for determining whether you need to file a tax return at all, and, if you must file a return, the tax rates that will apply to your income.
Although the seven rates are the same for everyone, the dollar levels at which the different tax rates kick in depend on your "filing status" - that is, whether you file your tax return as a single individual, as a head of household, as married filing jointly or as married filing separately.
Your status also has a wide-ranging effect in determining how numerous other tax rules will apply to you, including the standard deduction, IRA contribution limits, credits for children or for education expenses, taxation of Social Security benefits, credits for the elderly or disabled, the adoption credit, and the earned income credit.
Once you've determined your filing status, you next need to know how many personal exemptions you can claim, since the law allows you a tax exemption of $3,950 for each member of your family in 2014 ($4,000 in 2015).
However, the value of the personal exemption begins to phase out for unmarried taxpayers whose adjusted gross income exceeds $254,200. (The phaseout will start at $305,050 for married filing jointly and surviving spouses; $279,650 for heads of households; and $152,525 for married filing separately.) These taxpayers will be required to reduce their exemptions by two percent for each $2,500 or fraction thereof that their adjusted gross income (AGI) exceeds these threshold amounts. The value of the exemptions can be reduced all the way down to zero. (The inflation-adjusted threshold amounts for 2015 are $258,250 for unmarried taxpayers, $309,900 for married filing jointly and surviving spouses; $284,050 for heads of households; and $154,950 for married filing separately.)
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