Curious as to what next year holds in terms of federal income tax brackets? Well, look no further, because I’ve got the details below.
But before I get to the brackets themselves, I wanted to take a moment to remind you exactly how tax brackets work…
In our progressive tax system, the stated rates are marginal rates. That is, they only apply to the dollars in that particular bracket, and not to your total taxable income.
In other words, if you find yourself in (say) the 25% tax bracket, you’re not faced with paying 25% on your full, taxable income.
Rather, if you’re a single filer, your first $9,075 will be taxed at 10%, your next $27,825 will be taxed at 15%, and so on. The end result is an effective tax rate that is typically a good bit lower than your marginal rate.
As a result, moving to a higher tax bracket isn’t the income-decimating occurrence that some people think it is. If you slip across the line separating the 15% and 25% tax brackets, only the dollars above that mark will be taxed at the higher rate. Everything else will be taxed at 10% or 15%, as spelled out above.
In other words, moving to a higher tax bracket won’t cost you more money. It just makes those extra dollars that you’re earning worth a bit less.
And now, back to the topic at hand. The current (2014) tax brackets are as follows:
|Tax Bracket||Single Filers||Married Filing Jointly|
|10% Bracket||$0 to $9,075||$0 to $18,150|
|15% Bracket||$9,076 to $36,900||$18,151 to $73,800|
|25% Bracket||$36,901 to $89,350||$73,801 to $148,850|
|28% Bracket||$89,351 to $186,350||$148,851 to $226,850|
|33% Bracket||$186,351 to $405,100||$226,851 to $405,100|
|35% Bracket||$405,101 to $406,750||$405,101 to $457,600|
Note: If you’re curious, here’s a link to the 2013 tax brackets.
Some other IRS tidbits:
- The personal exemption stands at $3,950.
- The standard deduction is $6,200 for single filers.
- The standard deduction is $12,400 for married filing jointly.
- The gift tax exclusion is $14,000 per giver/recipient (unchanged from 2013).
As for retirement contribution limits, I’ve also updated the limits for 401(k), 403(b), and 457(b) plans as well as traditional and Roth IRAs. The short version is that not much is changing on that front for 2014.