Tax Brackets and your Paystub explained – Paystub Maker

Posted by on Apr 11, 2013 in Paycheck Taxes Explained | Comments Off on Tax Brackets and your Paystub explained – Paystub Maker

Home » Paycheck Taxes Explained » Tax Brackets and your Paystub explained – Paystub Maker

A brief breakdown of your paystub and the federal withholding tax. It is really quite simple. What confuses people when they compare the table given below, and their paycheck is that people automatically think that it is a percentage of their whole income. This is not the case, your tax brackets on your paystub are progressive. Which means you get taxed on different levels differently. The first level is taxed at one level and then the next at a different level until you reach your final level.

So, for example, 2 people make 34,000 and 36,000 respectively. If you look at the table, you’ll incorrectly see that Person A will be taxed at 15%  and person B  will be taxed at 25% that is NOT CORRECT, and your Paystub will show it, or at least it should.

The correct way to be taxed is much fairer. According to the table, both people will be taxed at 15%  up to the 35,350  level, then, person B will have only the remaining $650 at 25%. This prevents people from working a few hours less a year, just to be below certain tax bracket.

Tax Brackets for Income Earned in 2012

Tax rate Single filers Married filing jointly or qualifying widow/widower Married filing separately Head of household

10% Up to $8,700 Up to $17,400 Up to $8,700 Up to $12,400
15% $8,701 – $35,350 $17,401 – $70,700 $8,701- $35,350 $12,401 – $47,350
25% $35,351 – $85,650 $70,701 – $142,700 $35,351 – $71,350 $47,351 – $122,300
28% $85,651 – $178,650 $142,701 – $217,450 $71,351 – $108,725 $122,301 – $198,050
33% $178,651 – $388,350 $217,451 – $388,350 $108,726 – $194,175 $198,051 – $388,350
35% $388,351 or more $388,351 or more $194,176 or more $388,351 or more

If you think about it, doing it the incorrect way, the person making less, would actually earn more overall because they’re being taxed at 10% less on their money than person B. And there would be plenty of lawyers protecting your Paycheck paystub ready to go to court at a moments notice.

If you want to see this in action, check out our dynamic Paystub calculator to help you understand this in better detail

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