February 19th, 2013

The federal income tax is progressive. What does that mean and how does it apply to you?

10 thoughts on “February 19th, 2013”

  1. Katherine Graham says:

    It means that as your income goes up, so does the amount of federal taxes you pay. The more I make after college, the more federal taxes I will pay.

  2. Larry Huffman says:

    As you make more money the percentage that that goes to income tax goes up as well. It means that we should contribute to tax deferred savings such as an ira to reduce our taxable income.

  3. Aaron says:

    Progressive tax is the basis for why ROTH IRA make financial sense. As you earn more money your tax rate increases. For most people their tax rate is lower when they are younger compared with when they retire. I’m skeptical about ROTH though, because I know a lot of people who live on less money when they retire. However regardless of how much you draw in retirement, it’s a good bet that you will be paying a higher tax rate 30-40 years from now.

  4. Mike Finley says:

    Nice job everyone. You all added something new and different to the discussion. Our progressive federal income tax system (most states follow a similar approach) is designed to tax higher income at a higher rate. Here is where some get confused. Everyone has their early money (think money made in January and February) taxed at the 10% and 15% rate, but then gradually as the year goes on higher income people start to reach the 25%, 33%, 35%, and 39.6% range.

    Larry provided good advice to reduce your taxable income (federal and state if applicable) right away. Contribute more to your traditional retirement account at work. This will reduce how far you go in paying higher rates on your money (the marginal tax rate is tax on your last dollar earned, think December). Never fear making more money, but don’t chase the almighty buck either. Handle it wisely and focus on simple ways you can reduce your tax burden. You can go to the taxes tab on this website to learn more.

  5. Raj says:

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  6. Ajayi says:

    Great recap!I am really happy the Terry stnlryioe is complete, but it was nice seeing Arlene step in to save her man. I’m still on the fence with Bill I mean, I can see how NOT leaving with Eric could work if he’s trying to really change things from within. Escape wouldn’t help ‘the greater good’ but he’s acting so weird, I’m not sure where his head is right now but I’m anxious to see how this plays out. IBringing Bud back just to kill him lame IMO. There are SO MANY characters right now that could go and thin out the cast herd a bit. Hoyt I cannot imagine Jessica allowing him to die if she can prevent it via her blood.Oh, love that Lafayette seems to have his pizazz back. He had some great lines these past few episodes!

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