Page 8 - Means Wealth 2020/2021 Perspectives

HOW CAN I USE MY MARGINAL TAX RATE BRACKET IN
MY YEAR-END TAX PLANNING?
MY YEAR-END TAX PLANNING?
Article Provided by BerryDunn

e have all likely heard of some of the more typical year-end tax
W planning strategies like deferring income and/or accelerating
expenses, harvesting capital losses and maximizing charitable giving, but did
you know that your marginal tax rate impacts the tax planning related to all
of these strategies?

So what exactly does marginal tax rate mean? The marginal tax rate is the
tax rate that will apply to the next dollar of taxable income or the value of
the next dollar of deductions. In tax planning, we use the marginal rate to
measure how the tax obligation will change based on a particular strategy.
We calculate the marginal tax rate by dividing the additional amount of taxes
due by the amount of the additional income or deduction being considered.
The highest marginal federal income tax rate for 2020 is 37%.

Filing Status and Federal Income Tax Rates 2020
*refer to Page 27 to see the Projected Tax Rates for 2021

Tax Rate Married Filing Joint Single Married Filing Separately

10% $0-$19,750 $0-$9,875 $0-$9,875
12% $19,751-$80,250 $9,876-$40,125 $9,876-$40,125
22% $80,251-$171,050 $40,126-$85,525 $40,126-$85,525
24% $171,051-$326,600 $85,526-$163,300 $85,526-$163,300
32% $326,601-$414,700 $163,301-$207,350 $163,301-$207,350
35% $414,701-$622,050 $207,351-$518,400 $207,351-$518,400

37% over $622,050 over $518,400 over $311,025
“ instead of wondering where it went.

A budget is telling your money where to go

– Dave Ramsey

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