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Tax Around the World: USA January 1, 2006

To begin 2006, I’d like to start off with a series of posts titled “Tax Brackets Around the World”. Since I live in the USA, I’ll start with the US tax brackets. Every so often, I’ll post information about taxation in other parts of the world. The more we learn about our neighboring countries and other countries around the world, it will help me (and hopefully you) a little about how we live compared to others. I hope there will be readers from other countries to teach us about their personal finance strategies and how we can all benefit from ideas elsewhere.

As we know, tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, although this is much rarer). There are cutoff values for taxable income — income past a certain point will be taxed at a higher rate. In a flat tax system, everyone is in the same tax bracket, and all of their income is taxed at the same rate, no matter how high their income may be.

2006 USA Federal Tax Brackets

Marginal
Rate
Single Married Filing
Jointly
Head of
Household
Married Filing
Separately
10% 0 -
7,550
0 -
15,100
0 -
10,750
0 -
7,550
15% 7,550 -
30,650
15,100 -
61,300
10,750 -
41,050
7,550 -
30,650
25% 30,650 - 74,200 61,300 -
123,700
41,050 -
106,000
30,650 -
61,850
28% 74,200 -
154,800
123,700- 188,450 106,000 -
171,650
61,850 -
94,225
33% 154,800 - 336,550 188,450 - 336,550 171,650 - 336,550 94,225 - 168,275
35% over 336,550 over 336,550 over 336,550 over 168,275

These rates don’t include local and state income tax. So where are you and will you be going to the next bracket this year?

Comments»

1. Next Income Bracket » 7 weeks left to fund your IRA for 2005 - February 28, 2006

[…] The traditional IRA, on the other hand, is typically after-tax dollars as well, but the growth is tax DEFERRED. so you will pay tax on the capital gain between now and age 59, but you don’t have to pay it until you are 59 (or later). This is helpful because you can take money out whenever you want and presumably wait until you are not making any money and in a lower tax bracket before you take the tax hit. But there will be a bill to pay eventually. So the balance is between paying the tax every year, versus getting the deferral. definitely advantageous, but nothing close to the Roth IRA. […]

2. Anonymous - August 10, 2007

Don’t forget good old FICA. I.e. 7.5% or whatever it is these days and that’s not tiered. You pay that into the 100k range so that effectively bumps all of the federal tax brackets up by 7.5% if employed by a company.