Tax bracket

From Wikipedia, the free encyclopedia

Tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, although this is much rarer). Essentially, they are the cutoff values for taxable income — income past a certain point will be taxed at a higher rate.

1 Example
2 Tax brackets in the USA
3 Tax brackets in the UK
4 Tax Brackets in Switzerland
5 Tax brackets in New Zealand
6 Tax brackets in Canada
7 Tax brackets in Australia
- 7.1 2005-2006
- 7.2 2006-2007
8 References

[edit] Example

Imagine that there are three tax brackets: 10%, 20%, and 30%. The 10% rate applies to income from $1 to $10,000; the 20% rate applies to income from $10,001 to $20,000; and the 30% rate applies to all income above $20,000.

Under this system, someone earning $10,000 would be taxed at a rate of 10%, paying a total of $1,000. Someone earning $5,000 would pay $500, and so on.

Meanwhile, someone earning $35,000 would face a more complicated equation. The rate on the first $10,000 would be 10%; the rate from $10,001 to $20,000 would be 20%; and the rate above that would be 30%. Thus, they would pay $1,000 for the first $10,000 of income; $2,000 for the second $10,000 of income; and $4,500 for the last $15,000 of income; in total, they would pay $7,500, or about 21.4%.

[edit] Tax brackets in the USA

In 2006, the Federal tax brackets for a single (unmarried) person were:^[1]

10%: from $0 to $7,550
15%: from $7,551 to $30,650
25%: from $30,651 to $74,200
28%: from $74,201 to $154,800
33%: from $154,801 to $336,550
35%: $336,551 and above

This applies only to amounts above the standard deduction of $5,150 for an individual. For example, a single individual would actually pay 0% on the first $5,150, 10% between $5,151 and $12,700, 15% between $12,701 and $35,800, 25% between $35,801 and $79,350, and so on.

To compare how federal tax brackets changed from 1950 to 1980, look at the comparative chart in this link. [1]

Most states also levy income tax, exceptions being Alaska, Florida, Nevada, South Dakota, Texas, Washington, New Hampshire, Tennessee and Wyoming; see [2]

[edit] Tax brackets in the UK

In the 2006-2007 tax year, the tax brackets were:

10%: from £0 to £2,150
22%: from £2,151 to £33,300
40%: from £33,300 and above

This covers income after the personal allowance of £5,035 for single individuals. Which means that, an individual actually pays 0% on the first £5,035, 10% between £5,036 and £7,186, 22% between £7,187 and £38,336, and 40% from £38,336 and up.^[2]

[edit] Tax Brackets in Switzerland

Personal income tax is progressive in nature. The total rate does not usually exceed 30%.

The Swiss Federal Tax Administration website [3] provides a broad outline of the Swiss tax system, and full details and tax tables are available in PDF documents.

The complexity of the system is partly due to the fact that the Confederation, the 26 Cantons that make up the federation, and about 2 900 communes [municipalities] levy their own taxes based on the Federal Constitution and 26 Cantonal Constitutions.

[edit] Tax brackets in New Zealand

New Zealand has the following income tax brackets (as of May 2006). All values in New Zealand dollars. (With earner levy not included):^{[citation needed]}

19.5% up to $38,000
33% from $38,001 to $60,000
39% $60,001 and above
46.3% when the employee does not complete a declaration form (IR330)

Earners ACC Levy for the 2006 tax year is 1.3%

Checkout http://www.ird.govt.nz/income-tax-individual/itaxsalaryandwage-incometaxrates.html for more details on taxation in New Zealand

Indexing personal tax thresholds

                    Current level                          New level as at 1 April 2008
Lower threshold       $9,500                                         $10,081   
Middle threshold      $38,000                                        $40,324  
Upper threshold       $60,000                                        $63,672

Visit: http://www.treasury.govt.nz/budget2005/summary/indexing.asp