Federal Tax Brackets- A Comprehensive Overview

As the financial year-end is approaching, businesses and salaried individuals have already started their tax filing preparations. Some might prepare themselves for filing, and some might even hire professionals like a CPA in Venice for the job.

Whatever it may be, it is of utmost importance for every individual to be aware of their tax brackets. In this extract, we will have a comprehensive discussion on Federal Tax Brackets, and will also share some tips to file taxes correctly.

Understanding The Concept Of Federal Tax Brackets

In the United States, there are seven federal income tax brackets. The rates are- 10%, 12%, 22%, 24%, 32%, 35%, 37% respectively.  If you find yourself in the 37% bracket, it doesn't imply that your entire taxable income is taxed at 37%. Rather, 37% represents your highest marginal tax rate.

Back in 2017 in the United States, Congress overhauled the tax brackets and filing procedures through legislation, a move catalyzed by President Trump and Congressional Republicans. This reform policy not only reshaped the brackets but also altered the filing landscape significantly.

What’s notable about the reform policy was the reduction of the top rate in five out of seven brackets, which brought about a radical change.

As a part of this massive overhaul, the standard deduction witnessed a substantial boost, nearly doubling from its 2017 figure.

Note: If tax brackets and filing feel too overwhelming, hire a professional CPA in Venice to handle this effectively.

●       For The 2023 Tax Year

For the tax year of 2023, married couples filing jointly enjoyed a standard deduction of $27,700, while single filers and those married but filing separately claimed $13,850. Heads of household, meanwhile, were entitled to a standard deduction of $20,800 in the same period.

●       For The 2024 Tax Year

Fast forward to the 2024 tax year, and we see even further adjustments, not in tax percentages, but in the brackets. Joint filers now have a standard deduction of $29,200. Along with it, both single filers and married couples filing separately can claim $14,600. Heads of household, in turn, benefit from a standard deduction of $21,900.

Tips To File Your Taxes Correctly

If you have enough confidence and perseverance to pull the tax game all by yourself, there’s nothing better than that! Just keep the following tips in mind for an errorless and efficient filing process-

●       If you happen to need more time for taxes, you can make use of Form 4868 for a 6-month extension (from the deadline of April 15- October 15). But remember that this doesn't apply to payments. So, estimate and pay what you can to avoid penalties and interest.

●       If you are good with numbers, calculations, and record-keeping, using tax preparation software is advisable. But if you want some assistance to reduce your tax liability, consulting a tax professional like a CPA in Venice is the best way to get to your goal.

So, this is the whole scenario with Federal Tax Brackets in a nutshell. Just remember to hire a professional if the complicacies tend to bother you more than anything else!