Colonel_Buck wrote:When newspaper articles talk about the new tax rates going into effect on 1/1/2013, they always talk about households that make over X amount or under Y amount. Are they talking gross income or taxable income?
The tax rates are imposed on "taxable income", which of course is a "net" figure, determined by starting with gross income and deducting, from gross income, all the deductions to which one is entitled.
The rate structure would be something like it was for the tax year 2000.
So, for example, for an unmarried individual with no dependents, filing as "single," with, say $100,000 of taxable income for the year 2000, the tax would have been computed as follows (I'm showing just the first three brackets, which are the ones that would apply in my example):
Taxable income range
$0 - $26,250.00: the 15% bracket
$26,250.01 - $63,550.00: the 28% bracket
$63,550.01 - $132,600.00: the 31% bracket
The tax on $100,000 of taxable income would not be $31,000 (i.e., $100,000 x 31%). The tax would be $25,681.00.
That's computed as follows:
Tax on the first bracket: ($26,250 less $0) x 15% = $3,937.50
Tax on the second bracket: ($63,550 less $26,250.01) x 28% = $10,444.00
Tax on the third bracket: ($100,000 less $63,550.01) x 31% = $11,299.50
Thus: $3,937.50 + $10,444.00 + $11,299.50 = $25,681.00