federal income tax question about brackets?

Question

I read on wiki

http://en.wikipedia.org/wiki/Tax_bracket#Tax_brackets_in_the_USA

That when you move up a bracket, they only charge you the higher rate for the income that falls in that bracket... like the first 8000 is charged 10% and then the second $8000 is charged the higher rate of 15%

So why do people always say put money into a traditional RIA to "move down a tax bracket"

all you are really doing is avoiding $5000 of your money taxed at the highest tax bracket you reach, not actually avoiding all your money from higher rates am I right?

oh I live in the USA

Answer 1

You are correct Cody. As an example, in the 2006 tax tables for a person filing single,
If taxable income is over $0 but not over $7,550
The tax is 10% of the amount over $0
If taxable income is over $7,550 but not over $30,650
The tax is $755 (or 10% of the first $7,550) plus 15% of the amount over 7,550.

Answer 2

You are NOT taxed at one rate for all of your earnings. You are correct in that you "move down a tax bracket" which does just as you explained. I think that you owe yourself the best answer.

Answer 3

You are right. Many people don't understand tax brackets, and wongly think that if they are in a higher bracket, ALL of their income is taxed at a higher rate.

Answer 4

that's no longer from the NYtimes! It of course states that the strategies became from The Tax commencing up submitted to their weblog. you will additionally word that each and each graph is designed to artwork of their want. None of them instruct one hundred%. some instruct 60%, some instruct 80%. ordinary of somebody attempting to skew the outcomes. Why am I no longer shocked?

Answer 5

you are not correct. You are taxed at one rate for ALL your earnings.