Federal income tax brackets
Friday, November 10th, 2006
Categorized as: Savings Bond taxes
The IRS has announced its inflation adjustments for the 2008 tax year. As you know, US income tax rates are graduated. Everyone pays the same amount on their first dollar of income. The percentage you pay on your last dollar of income, however, depends on what your total income is.
The income tax rate you pay on your last few dollars of your income is called your IRS tax bracket or your marginal tax rate.
If you can move income from year-to-year, you will pay the least in taxes if you move your income to the year in which you are in the lowest tax bracket and have the lowest marginal tax rate.
The tax-deferral feature of US Savings Bonds gives you this kind of flexibility. Within the range of the 30-year-life of a Savings Bond, you can choose when to redeem the bond and pay the income tax on the interest you've earned.
The following table of IRS income tax rates will help you determine your tax bracket or marginal tax rate. You need to know your filing status and your taxable income.
Your taxable income is not the same as your total income, but is your income after deductions and exemptions. Look for the line on your tax return labeled Taxable Income.
Single
|
|||
| When Your Taxable Income Is Over: |
Your Marginal Tax Rate Is: |
||
|
Last year (2006) |
This year (2007) |
Next year (2008) |
|
| $0 | $0 | $0 | 10% |
| $7,550 | $7,825 | $8,025 | 15% |
| $30,650 | $31,850 | $32,550 | 25% |
| $74,200 | $77,100 | $78,850 | 28% |
| $154,800 | $160,850 | $164,550 | 33% |
| $336,550 | $349,700 | $357,700 | 35% |
Married Filing Jointly
|
|||
| When Your Taxable Income Is Over: |
Your Marginal Tax Rate Is: |
||
|
Last year (2006) |
This year (2007) |
Next year (2008) |
|
| $0 | $0 | $0 | 10% |
| $15,100 | $15,650 | $16,050 | 15% |
| $61,300 | $63,700 | $65,100 | 25% |
| $123,700 | $128,500 | $131,450 | 28% |
| $188,450 | $195,850 | $200,300 | 33% |
| $336,550 | $349,700 | $357,700 | 35% |
Married Filing Separately
|
|||
| When Your Taxable Income Is Over: |
Your Marginal Tax Rate Is: |
||
|
Last year (2006) |
This year (2007) |
Next year (2008) |
|
| $0 | $0 | $0 | 10% |
| $7,550 | $7,825 | $8,025 | 15% |
| $30,650 | $31,850 | $32,550 | 25% |
| $61,850 | $64,250 | $65,725 | 28% |
| $94,225 | $97,925 | $100,150 | 33% |
| $168,275 | $174,850 | $178,850 | 35% |
Head of Household
|
|||
| When Your Taxable Income Is Over: |
Your Marginal Tax Rate Is: |
||
|
Last year (2006) |
This year (2007) |
Next year (2008) |
|
| $0 | $0 | $0 | 10% |
| $10,750 | $11,200 | $11,450 | 15% |
| $41,050 | $42,650 | $43,650 | 25% |
| $106,000 | $110,100 | $112,650 | 28% |
| $171,650 | $178,350 | $182,400 | 33% |
| $336,550 | $349,700 | $357,700 | 35% |
Estates and Trusts
|
|||
| When Your Taxable Income Is Over: |
Your Marginal Tax Rate Is: |
||
|
Last year (2006) |
This year (2007) |
Next year (2008) |
|
| $0 | $0 | $0 | 15% |
| $2,050 | $2,150 | $2,200 | 25% |
| $4,850 | $5,000 | $5,150 | 28% |
| $7,400 | $7,650 | $7,850 | 33% |
| $10,050 | $10,450 | $10,700 | 35% |



[…] Look up your taxable income under the filing status column in the table for the year you cashed the bond on our federal income tax brackets page. The percentage you need to hold back is on the right. […]
[…] Check my page on federal income tax rates for help figuring this out. […]
[…] If your dad likes Savings Bonds he can just reinvest in new ones. But save back enough money to pay the income tax. You'll find my post on federal income tax brackets helpful in determining how much to hold back. […]
[…] The value of your Savings Bonds is probably about $45,000 and about $15,000 of that is interest that you'll have to report as income if you cash these all in at once. If there's any chance your tax bracket might be lower in the future, that's a reason to keep the Savings Bonds. […]
[…] Don't know what tax bracket you're in? My page on federal income tax brackets will help you figure that out right now. […]
[…] The trick to paying the least amount in income taxes is to have the person with the lowest tax rate pay them. Is that you or your heirs? If it's you, would paying all the taxes on your final tax return push you into a higher tax bracket? If so, you should make a plan to cash some of your Savings Bonds each year, pay the tax, and reinvest in new bonds. […]