Tax Brackets Explained for 2020
“You want to be at the highest tax bracket you can possibly be at.”
Angela Sticca Snyder (01:01-01:04)
The IRS revealed the 2020 tax brackets, and it’s never too early to start planning to reduce money owed for taxes. You can start thinking ahead about how to handle your 2020 finances in the most cost-effective way. In this week’s episode, Angela Sticca Snyder explains tax brackets for 2020 and why they are important.
If you had the choice between a 0%, 12%, or 37% tax bracket, which one would you choose? Some of you might respond with, “I’m going to pick the highest tax bracket there is. I’m going to pick 37%. What’s 0%?” The 0% tax bracket means unemployed. You want to be at the highest tax bracket you can be at.
I’m going to use simple and easy to understand numbers. They’re not going to be real tax brackets. For instance, let’s say you made $100,000, the tax bracket from zero to $50,000 was 0%. Then, from $50,001 to $100,000, it was 15%. Then from $101,000 on up, on to 90%. Let’s say I earned $100,001. I’m in the 90% tax bracket. It sounds horrible, doesn’t it? But in the 90% tax bracket, my $1 is getting taxed at 90%. My zero to $50,000 has no tax on it. My $50,001 to my hundred thousand has the 15% bracket. You always want to be in the higher tax bucket because it’s only the incremental amount above that is being charged.
It’s your taxable income that is important, not your gross income. We’ve got our wages, we’ve got our 1099, and our interest, dividends, or capital gains. We’ve got adjustments that come off.
Maybe we have self-employed health insurance, or we contribute to our retirement account and the standard deduction. We itemize our deductions. We have our gross income, then our deductions, and that gives us our taxable income.
That is the number that you look at to determine what tax bracket you’re in, not what’s on your W2 or your 1099. I hope this helps you achieve the highest tax bracket possible.
How to Get Involved
Taxanista is a leading certified public accountant who offers reliable professional tax and accounting services. She is a consummate strategist. She loves listening, analyzing and developing strategic plans. Do you have bigger issues? Taxanista can help you fight off the IRS. Angela knows how unsettling some of your struggles are, that’s why she offers private consultations for your business and tax matters. Increase your profit by knowing your numbers. Reach out to her now. https://www.taxanista.com/