Does going into a higher tax bracket increase the rate on ALL your earnings?

Question

I'm not clear - when your earned income goes into the next tax bracket, does that mean ALL your earned income is taxed at the higher rate or just the amount inside the new bracket?

Answer 1

Only the amount that is inside the new bracket is taxed at the higher rate. For 2007,

The first $7,825 of taxable income is taxed at 10%
from $7,826 to $31,850 is taxed at 15%
from $31,851 to $77,100 is taxed at 25%
from $77,101 to $160,850 is taxed at 28%

I'm going to stop there because if you have over $160,850 in taxable income, you should stop being such a cheap _______ and have your taxes done by a CPA. :)

Answer 2

No. It just applies to the amount over the tax bracket amount (inside the new tax bracket).

Answer 3

Just the amount above the new bracket. This is called the marginal rate.

Answer 4

Just the amount that is inside the new bracket.

Answer 5

(I'm assuming this is US). No, the taxes are marginal. i.e. a certain percent on you first x thousand dollars, a different percent on your next y thousand dollars.