The Basics of Income Tax Brackets

There are many income tax brackets available, including Tiered system, adjusted for inflation, Inverted pyramid and earned income credit. Let’s look at some of the main differences. You can find more information in our articles on earned income credit, Inverted pyramid and Adjusted to inflation. Make sure you know your particular situation to determine the best tax bracket. These are some guidelines. For more information on the details of the income tax brackets, please read the next article.
Inflation adjusted

In November, the IRS will announce the federal income tax brackets 2023. These new parameters are based on the monthly average CPI change during the federal fiscal years, which started in October last year and ended September this year. Although inflation costs have increased by approximately 8% over last year, it has not been enough for the IRS to alter the tax brackets.
Tiered system

Political debate surrounds the tipping point between a flat and progressive income tax bracket systems. But one thing is certain: a progressive tax bracket system increases government revenues and benefits taxpayers. It also returns more money to the economy. A tax bracket system has another major advantage: it automatically stabilizes after-tax income. The individual will see a decrease of income due to a decrease on funds. Progressive taxation is not without its critics. Some people argue that a flat tax system would be fair since all income levels are equally treated.
Inverted pyramid

The income tax brackets are inverted pyramid-like. Only 10% of the highest income is subject to tax. The top bracket for single filers is $539,000. The tax rate is determined by the income. Consider an inverted pyramid to illustrate this concept: The bottom tier has a zero-rate and is supported by a narrow, pointed pinnacle. The top tier, however, is 37%.
Earned Income Credit

The Earned Income Credit (EITC), a federal deduction, is available to taxpayers who meet certain criteria. The credit is available to working individuals who are at least 19 years old. You can claim credit for foster youth or homeless teens under 25 years old. You can still claim credit as long you are at least 25 and not dependent.
Individual tax rate

It will help you plan your finances by allowing you to know your individual tax rate for each income bracket. It will allow you to calculate your tax refund. Below is information about federal income tax rates in 2021 and 2022. The individual tax rate can change every year. It is important to be aware of the current tax bracket before filing taxes. To find the most current tax rate, you can visit the IRS website.