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Dec 12 2015

Tax Preparer in Santa Rosa and Sonoma County Answers “What Happens if I Go Into the Next Tax Bracket?”

If we had a nickel for every person who came in worried about going into the next higher tax bracket, we’d have to buy a lot of coin rolling papers. There are some situations where trying to postpone income until after January will benefit you, but going into the next higher tax bracket doesn’t have the drastic effect that most people seem to think it has. In our work as a tax preparer in Santa Rosa, Sonoma County for well over ten years, we have assured client after client of the same thing.

Going Into the Next Tax Bracket Only Affects Income Over That Level

Tax Preparer in Santa RosaIf going into a higher tax bracket meant that all your income were going to be taxed at the higher percentage, then yes, there would be certain incomes that would mean you’d end up with less money than if you’d made a slightly lower income in the first place. In that case, we’d be recommending our clients to avoid certain incomes like a wrestler avoids that drink of water that would send him into the next weight class.

But that’s not how it works. Probably without even knowing it, you have been paying multiple levels of income taxes all along. Let’s say you’re a single woman making $50,000. Well, you might hear “the tax rate for 2015 for people between $37,451 and $90,750 is 25%.” That’s true, but you won’t pay 25% on all $50,000. You’ll pay 10% on the first $9,225, 15% on the $27,525 that got you from $9,225 to $37,450, and 25% only on the $12,550 that’s actually in the 25% tax bracket.

This applies to the super rich, too. That 39.6% rate only applies to income over $413,200. They pay the same lower rates on parts of their income that you do. Is that news to you?

California income tax rates are generally lower, but they follow the same principle. If you live in Sonoma County, a tax preparer in Santa Rosa and Sonoma County can give you more specific advice and help with exemptions and deductions.

SCA is a tax preparer in Santa Rosa and Sonoma County. We believe in honesty and integrity, and we want to make your taxes understandable and save you as much money on your taxes as possible. CONTACT US or call (707) 799-2705 if we can help you with your 2015 taxes.