“You don’t want to earn too much- that’ll put you in a higher tax bracket.” You may have heard this particular piece of tax advice before. While earning more money can technically put you into a higher tax bracket, that isn’t as bad as it sounds.
The United States has a progressive tax system, where taxes increase as income increases. Each batch of income is taxed at a different rate, also referred to as tax brackets.
It may help to imagine tax brackets as a wedding cake. Wedding cakes have different tiers. The first tax bracket is like the lowest tier of the wedding cake- that batch of money is taxed at the lowest rate. The next batch of money you earn is taxed at the next highest rate, and so on. If you go one dollar over into the next tax bracket, that doesn’t mean that ALL of your money on the lower levels is taxed at that higher rate. It means that one dollar is taxed at the higher rate, and the rest of your money is still taxed at the previous rates.
Clergy Financial Resources helps make tax time understandable. To hire Clergy Financial Resources for your 1040 needs, visit our website at https://www.clergytaxnet.com/services/clergy-tax-preparation/
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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