Tax Bracket

A tax bracket is a range of income levels that are taxed at the same rate. The income levels in a tax bracket are defined by the tax code and are used to calculate the amount of tax owed for a particular income level.

There are typically several tax brackets, with each bracket having a different tax rate. The lower brackets have a lower tax rate, while the higher brackets have a higher tax rate. The tax rate for each bracket is usually determined by the government, and is often adjusted on an annual basis.

For example, in the United States, the 2023 tax brackets are as follows:

• Single filers: 10%, 12%, 22%, 24%, 32%, 35%
• Married couples filing jointly: 10%, 12%, 22%, 24%, 32%, 35%

The above tax brackets apply to taxable income up to $500,000. For taxable income above $500,000, the tax rate is 37%.

Benefits of Tax Brackets:

• They provide a gradual increase in the tax rate as income increases.
• They reduce the tax burden on low- and middle-income earners.
• They generate revenue for the government to fund public programs and services.