2007 Federal Tax Rate question?

Question

i am confused on the rates for this year.
it shows different percentages for how much you you will owe, that i understand, but what does it mean when they also add ex amount of dollars on top of the percentage?


ex:
taxable income $31,850 - $77,100
(the tax is)

$4,386.25 plus 25% of the amount over 31,850


what is the extra $4,386.25 for? & how does it interfer with your income?

thanks <33333

(best nswer will get 10 points + a tumbs up!)
i have the link so you can see what im talking about

http://www.irs.gov/formspubs/article/0,,id=164272,00.html

Answer 1

If your income is $50,000 your tax is $4386.25 for the first $31850 of income.

Then you still have an additional 50,000 - 31,850 = 18,150 of income. This is taxed at 25% so the tax for this is .25 * 18,150 = 4537.5

So, total tax is 4386.25 + 4537.50 = $8923.75. Hope that explains it a bit better.

Answer 2

The $4,386.25 is the tax on the first $31,850 of income. The way it works is that the first $7,825 is taxed at 10% which would be $782.50 in tax if you earned $7,825 (7,825 x 10%). The next tax bracket is the 15% bracket which taxes the income earned above the $7,825 all the way to 31,850. If you earned the $31,850 you are taxed at 10% of the first $7,825 you earned ($782.50 in tax) and taxed at 15% for the rest, which would be $23,825 ($3,573.75 in tax) the total tax if you earned exactly $31,850 would be $4,356.25. That is what the $4,386.25 represents. It is the tax on the first $31,850 of taxable income. The 25% would be on taxable income above the $31,850. You would take that tax amount and add it to the $4,386.25 to arrive at total tax.

Answer 3

The $4386.25 is for the tax you owe on the income up to $31,850. Then anything over that is taxed at 25%.

Answer 4

The $4,386.25 is the tax on the first $31,850. It's not extra. Then you add 25% of the income above $31,850 to the $4,386.25 to get your total tax.