Quote:
Originally Posted by kdbolt70
offhand question, I apologize if this is verbose. Does your tax bracket get determined based on your gross income? or after your deductions?
Also, roughly what would this roughly equate to in dollars, having a $7500 tax deduction?
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Quote:
Originally Posted by dayvedayve
Your tax is based on what is left after deductions That is the "taxable income." Your "tax bracket" is then determined by that figure. Deductions come off gross income. Credits come off what you owe in taxes. Credits get the full dollar amount. Deductions only save you a percentage.
For example.... If your tax bracket is 15% You will save about $1100 on taxes.
If you are at 10% then it will be around $750
Another thing that could happen is that you could be in a lower tax bracket than normal if you were within the range of the deduction before. The lower your taxable income the lower your tax bracket.
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dayve summed it up nicely, but you can look here for a nice graphical summary -
http://taxes.about.com/od/2008taxes/..._tax_rates.htm or check the IRS 2008 1040 instruction form for complete tax tables -
http://www.irs.gov/pub/irs-pdf/i1040tt.pdf