There is a lot of confusion when it comes to Marginal Tax Rates, or "Tax Brackets." This video attempts to clear up at least some of that confusion and show you, in most cases, your actual, or "effective" tax rate is much lower than your "tax bracket" rate.

2024 UPDATE/CORRECTION:

Using the 2024 tax bracket tables, $29,200 Standard Deduction, and the 2024 $2,000 Child Tax Credit, here are the results of the video's three examples:

Example 1: Jon $84,000 wage income:
$29,200 not taxed + $23,200 taxed at 10% + $31,600 taxed at 12% = $6,112 in tax - $2,000 Child Tax Credit = $4,112/$84,000 in income = 4.9% effective tax rate.

Example 2: Jon $84,000 wage income, Jan $18,000 wage income:
$29,200 not taxed + $23,200 taxed at 10% + $49,600 taxed at 12% = $8,272 in tax - $2,000 Child Tax Credit = $6,272/$102,000 = 6.1% effective tax rate.

Example 3: John $84,000 wage income, Jan $18,000 self employment income:
(Taxable income before Standard Deduction is $102,000 less $4,362 S.E. tax breaks or $97,638)
$29,200 not taxed + $23,200 taxed at 10% + $45,238 taxed at 12% = $7,749 in tax - $2,000 Child Tax Credit + $2,543 Self Employment Tax = $8,292/$102,000 = 8.1% effective tax rate.

Additional information:

IRS Publication 17 "Your Federal Income Tax:" [ Ссылка ]

The tax tables and marginal rates can also be found in the instructions for Form 1040: [ Ссылка ]

Intro and background music: “Bluesy Vibes” - Doug Maxwell - YouTube Audio Library

DISCLAIMER:

The information presented in this video is for informational and educational purposes only, and is not intended to render tax advice for specific situations. If you have questions about your specific tax situation, please consult the resources linked above or consult with a qualified tax professional in your community.

The information contained in this video is based on tax law and IRS regulations as of the date of publication, and may be subject to change.

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