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I know that for U.S. Federal Personal Income Tax, the schedule is progressive, so for a single person filing for $60,000 (in 2011 for this example), the first $34,500 is taxed at 15% and then the rest is taxed at 25%.
What I don't understand is how the numbers in the "The Tax Is" column were calculated. For example, 15% of $34,500 is $5,175, not $4,750. How is the $4,750 calculated?
See the attached image here Tax Bracket Schedule
Thanks!
Just to be clear, this is a 2011 tax table. No problem as an example, but I don't want you paying the wrong tax if you're actually using this now.
Beyond that, you've got the right idea, but you need to keep track of the progressive nature at each rung.
The first line your table is
Taxable But not Tax is Plus Of amount
Income over over
$0 $8,500 $0.00 10% $0
so if you're in the lowest bracket you just pay 10%.
The second line is
8,550 34,500 850.00 15% 8,500
The third column contains 10% of the top of the first bracket, which is 10% of $8,500. So far so good.
Now the third line is
34,500 83,600 4,750.00 25% 34,500
Now to get the third column here, you take the $850 from the third column of the second line, and you add 15% of ($34,500 - $8,550). In other words, you're adding the marginal tax for the full width of the previous bracket only.
