Your Tax Bracket
March 11th, 2008
Your Tax Bracket
Question: How do they figure out how much tax you owe? How do they determine your tax bracket?
I am trying to figure out my taxes. I used HRBlock.com to fill out my taxes, but I’m confused. My AGI is $32,643 and I have itemized deductions of $10,498. It says my taxable income is $18,845 (I guess that includes some adjustments). But then it says that I owe $4,424 in taxes. Where does this come from? I thought taxes were figured on your taxable income. But 15% of $18,845 is $2827 and 25% of it is $4,711. And I don’t know of any tax bracket between these.
Also, I’m considering contributing to an IRA if it would bring me to a lower tax bracket. What determines your tax bracket? Your AGI? Your taxable income??
Thanks
Answer: Your taxes are figured on your taxable income.
Contributing to a Traditional IRA would lower your taxable income. Contributing to a Roth IRA would not.
I don’t know anything about H & R Blocks website. I use TurboTax to do my taxes. I’ve never had a problem with it figuring out my taxes, including capital gains/losses. I highly recommend it.
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