Oftentimes, taxes are one of the top 3 biggest expenses of the year! It is essential to know and understand what tax bracket you are in. From planning when to use certain deductions or making sure you are witholding enough, knowing what tax bracket you are in will help make important investment and financial decisions. Imagine if an extra deduction could take you from the 25% to the 15% tax bracket. That would be important, right? Remember, deductions become more valuable as income reaches higher levels because deductions reduce taxable income against higher tax rates first.
To determine your tax bracket, match up your taxable income (this is your income less all your deductions and exemptions) with the ordinary income tax rates. Capital Gains rates are for investments in Non-IRA accounts and held for longer than one year.
We believe that taking a proactive approach is better than a reactive strategy - especially regarding income strategies. Look out for future tax related posts to help you make sure you are getting the most out of your tax-reduction strategies!
*The amount you owe is based on the lesser of your total net investment income or the amount of your MAGI that exceeds $200,000 for individuals, or $250,000 for couples filing jointly.
LPL does not offer tax advice or services. Please consult your tax advisor to discuss tax matters. Tax laws and provisions are subject to change.