Estimated 2009 tax brackets

[noppenbd]

Not the official numbers, but planners start your engines...

Blueprint for Financial Prosperity: personal finance blog with anecdotes, advice and commentary.

[savingmama]

Interesting- thanks for the info. Once we have a new president, how soon would their policies change the tax brackets/ tax policies- not until 2010?

[pfblueprint]

Probably longer than that because the legislature has to draft the laws, both chambers vote, they have to resolve the differences, then the President signs. If it's Republican President (McCain) and Dem congress, probably longer than if it is a Dem President (Obama) and the Dem congress.

There's no saying where things will actually go though, all the campaign rhetoric is just that... rhetoric.

[jIM_Ohio]

Interesting- thanks for the info. Once we have a new president, how soon would their policies change the tax brackets/ tax policies- not until 2010?

The brackets change each year- the caps to each bracket do go up, and the standard exemption also goes up.

Bush got his tax cuts passed on his first budget if I remember correctly... so I think it is possible for tax cuts to get passed quickly.

The administation and tax policy is more likely to change the percentages (10-15-25-28-33-35% marginal brackets)- the ranges for each bracket change each year already whether administration policy is to raise or lower taxes.

More than likely tax policy would keep the tiered system. It might add a tier (for example maybe a 7th tier is added at 45% for incomes above a new number like $500k).

If the tiered system was removed, that would be a flat tax. Any person doing this will probably be accused of taxing the poor. In addition if someone raised the 10 or 15% percentages, they would also be accused of over taxing the poor. 75% of the country is in the 15% bracket or lower.

[amarowsky]

im in the 15% bracket i believe. ( still only part time at work at a 80% pay) But man that would suck to make just enough to get taxed and extra 10%! I'd be really shook.

[amarowsky]

Ty for information by the way Noppenbd

[savingmama]

im in the 15% bracket i believe. ( still only part time at work at a 80% pay) But man that would suck to make just enough to get taxed and extra 10%! I'd be really shook.

It sounds like you are a little confused on this. Let me try to explain. Once you earn enough to be taxed in the 25% tax bracket, that doesn't mean your entire taxable income all of a sudden is taxed at 25%. Once you make too much above the 15% tax bracket, only that additional money would be taxed at 25%.
Let me try to explain with numbers (fictious of course, I dont want to look anything up): say you can have$20,000 taxable income before you enter the 15% tax bracket, and $40,000 taxable income before you enter the 25% tax braket, and you have $45,000 taxable income, then the breakdown would be:

20,000 made at 10% tax= $2000 tax
(40,000-20,000)= 20,000 made at 15% tax= $3000 tax
(45,000-40,000)= 5,000 made at 25% tax= $1250
For a total tax of $6250

It would not just be $45,000 x 25% or $11,250

I know that is kind of confusing, maybe someone else can explain it better.

[pfblueprint]

savingmama - I think you explained it well, it's just important to remember that the tax rate only taxes your NEXT dollar, hence the term 'marginal.'

Also, remember things like the standard deduction, etc. If you do your taxes in TurboTax (or other software), check out the top summary page. It will tell you your "effective tax rate," which will be much much lower than your "marginal tax rate."