Marginal tax rates are based on adjusted gross income, type of income, and amount of income. Common adjustments include tax credits, tax free income adjustments, and deductions.
No they don’t. The standard exemption for fiscal year 2024 is $14,600 for every single filer, regardless of total income. The first $14,600 is literally not taxed.
There’s also many credits that do not take income into account at all.
I’m an IRS certified tax preparer, please trust me that you’ve got it wrong. There are brackets, but they are (mostly) only applied after all the exemptions, credits and deductions. That’s why you hear about things like “gross income”, “adjusted gross income”, and “modified adjusted gross income”.
The lowest tax bracket is 10%. That bracket is only applied on income from $0 to $11,600. If you make only $12,000 that year, then before that tax bracket is applied, all of your income is already exempted. It’s similar to a tax bracket, but it’s not, because exemptions are different for different filers. And reductions and credits further complicate things. Your adjusted income is often very different than your gross income.
You are literally not required to file taxes if your income falls below this threshold. It would be dumb, because you’d probably get some money if you did file, but all of your income is exempt.
Practically speaking, there’s not much difference between exempt income and a tax bracket of 0%, but the semantics of the statement “every penny is taxed” requires some clarification especially when there’s a portion of your taxes literally called an “exemption”.
Marginal tax rates are based on adjusted gross income, type of income, and amount of income. Common adjustments include tax credits, tax free income adjustments, and deductions.
All of those still take into account your total income
Even if he meant that his hyperbole is still wrong. Every penny is not taken into account since all amounts are rounding to the nearest dollar.
No they don’t. The standard exemption for fiscal year 2024 is $14,600 for every single filer, regardless of total income. The first $14,600 is literally not taxed.
There’s also many credits that do not take income into account at all.
Brackets are how your total income is broken up. Your total income is still relevant so they know when to stop taxing
That’s a very different statement than “every penny you make is taxed”.
A tax at 0% is still a tax, I feel people are purposively missing the point rather than debate them
It’s literally exempt from taxation, that’s why they call it an exemption.
Idk about you but I get it back through tax returns which would suggest it’s not exempt, just 0%
For comparison; Churches are exempt and don’t pay tax then get it refunded
That’s…not how that works
I’m an IRS certified tax preparer, please trust me that you’ve got it wrong. There are brackets, but they are (mostly) only applied after all the exemptions, credits and deductions. That’s why you hear about things like “gross income”, “adjusted gross income”, and “modified adjusted gross income”.
The lowest tax bracket is 10%. That bracket is only applied on income from $0 to $11,600. If you make only $12,000 that year, then before that tax bracket is applied, all of your income is already exempted. It’s similar to a tax bracket, but it’s not, because exemptions are different for different filers. And reductions and credits further complicate things. Your adjusted income is often very different than your gross income.
You are literally not required to file taxes if your income falls below this threshold. It would be dumb, because you’d probably get some money if you did file, but all of your income is exempt.
Practically speaking, there’s not much difference between exempt income and a tax bracket of 0%, but the semantics of the statement “every penny is taxed” requires some clarification especially when there’s a portion of your taxes literally called an “exemption”.