H&R Blockheads can't answer simple question!?

Question

I have a simple question that I hope somebody can shed light on. When you make more money from one year to the next and you move into a "higher tax bracket" is your total taxable income taxed at the higher percentage, or just the amount that's over?

For example, with 15% tax up to $50K (taxable) per year, that's $7500 paid in taxes. When your income goes over $50K, let's say to $51K...

Do you pay 15% of $50K and 25% of $1K

or

Do you pay 25% of $51K??

Answer 1

Nope, in your example you do not pay 15% of the enire $50k. Only the part that exceeds the lower bracket is taxed at the higher rate.

For a single filing status tax payer,
income between $0 - $7550 is taxed at 10%
from $7551 - $30650 is taxed at 15%
from $30651 - $74200 is taxed at 25%

Best wishes.

Answer 2

Only the amount of your income that is over the bracket level is taxed at the higher rate.

I'm no great fan of H&R Block, but am surprised that someone there couldn't answer a basic question like that.

Once you get past the amount of your income that isn't taxed at all, a certain number of dollars is taxed at 10%, the next set of dollars at 15%, the next at 25%, then 28%, then 33%, then anything over that at 35%, the highest bracket. The dollar limit for each bracket depends on your filing status.

In your example, only the last $1K would be taxed at 25%.

Answer 3

>>>Do you pay 15% of $50K and 25% of $1K<<<

Correct. Only the amount over the bracket upper limit is taxed at the higher rate. In our graduated tax system, it is impossible come out behind by making more money as some people seem to think.

Answer 4

It's the amount that's over.

For example, let's say there are two brackets, 10% and 25%, with the break at $50,000.

If you make less than $50K, you pay 10% of what you make.
If you make exactly $50K, you pay $5,000.
If you make more than $50K, you pay the $5,000, plus 25% of the income over $50K. Not 25% of the whole thing.

If your tax preparer doesn't know that, go somewhere else.

Answer 5

The first X dollars of taxable income are taxed at 10%.
The next Y dollars are taxed at 15%.
The next Z dollars are taxed at 25%.

You can verify my answer with the IRS tax table linked below and a cheap calculator.

Answer 6

Most blockheads know how to fill out the answers on their 'puters. They know not how the system works behind the scenes. liberty and "jackless helpless" are even worse.

Compare their business to McDonald's. McD's teaches you how to push the button and drop the fries and when the buzzer buzzes, you take the fries out of the grease. The don't tell you what's in the fries or how they are made. That's not important to a fry cook. Same at the tax places...just get you a refund and off you go.

Answer 7

Tax rates should always be referred to as 'graduated'. In your example, the $1,000 will be taxed at 25% and the $50,000 taxed at 15%.

At times people will be subject to AMT which IS a flat tax. But that is only if it applies.

Answer 8

Just the amount that's over. The amounts up to the brack are taxed at the lower rate.

Answer 9

Your tax rate is based on income after allowable deductions. If you gross 100k, but deduct 45k in deductions, your tax is based on the 55k adjusted gross income.

Answer 10

you do realise that those h@r block people are only getting paid minimum wage.what do you expect?and the test to become a tax preparer is very easy.