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How Tax Brackets and Rates Effect Taxes

Each portion of your income falling within the individual tax brackets is taxes at the corresponding tax rate. Therefore, several calculations are made to determine the tax amount owed on each portion of income. Then each of these calculation results are added together to give you your overall tax amount due.

The lower your income is, the fewer tax brackets you fall into. This in turn dictates how many calculations need to be made to determine your total tax bill.

Tax deductions help lower your overall taxable income which is used to calculate your taxes. This net figure after deductions is referred to as your net income.

By taking advantage of tax deductions you can lower your taxable income and reduce the number of tax brackets you fall into. This in turn will lower your overall tax liability.

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