WHILE we approach the last quarter of the year, this serves as a reminder that it’s neither too early nor too late to plan and strategize your income taxes for 2011. New year brings new tax laws. Plan now, not later because when the year is over, there is not much you can do anymore. Quite frankly, tax planning should take all year long.
Tax Brackets
You might be on your last dollar, but it’s not always a reason to sing the blues. In fact, in the strange world of taxation, your last dollar could actually put you in a higher tax bracket. Put on your shades, grab your guitar, and read on.
A tax bracket is a range of incomes taxed at a specific rate. For example, in 2010, the lowest tax bracket might be $0-$8,375; the second might be $8,376-$34,000; the third $34,001-$82,400. When your income moves above or below the range limits (from $8,375 to $8,376 for example), you switch to a different tax bracket
Tax brackets are components of a progressive income system, in which taxes increase progressively as income increases. The idea is that high-income taxpayers can shoulder the burden of a high tax rate. Low-income taxpayers pay less because they can’t afford to pay high taxes.
Taking the above numbers into consideration, it is important to have a consultation with your tax professional, especially if you’re somewhat close to the thresholds. The calculation of taxable income (tax brackets) involves deducting personal exemptions and deductions from your gross or total income. You don’t want to jump from 15% to 25% federal tax bracket for a few hundred extra dollars earned, do you?
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Evangeline is a California registered tax preparer, a legal document assistant for the general public, and a freelance paralegal offering assistance to various attorneys. She can be reached at her office at 2451 Colorado Blvd. #2, Eagle Rock, CA 90041 or at her marketing location inside the Eagle Rock Plaza. Her phone number is (323) 550-1869 or you can check her website at: www.evangelinegiron.net. She is a member of the court-endorsed California Association of Legal Document Assistant (CALDA) and an Associate Member (Non-attorney) of the LA County Bar Association (LACBA).
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Note: Evangeline is not an attorney nor does she provide legal advice. She is a bonded and registered Legal Document Assistant and prepares legal documents per the specific direction of clients.