For 2015 tax year, the dollar amounts for determining tax brackets range from the lowest bracket of $0 to $9,225 to the highest bracket of $413,201 and more. The IRS annually adjusts tax bracket dollar amounts to account for inflation, states Forbes.Continue Reading
Federal tax brackets are designed as a progressive tax system. As income rises, the tax rate also rises up to a certain income, after which the same tax rate also applies to all higher incomes. In 2015, this is $413,201. Individuals do not pay the tax rate for their tax bracket on all their income. They pay rates for brackets up to and including their income level. For example, an individual making $150,000 in 2015 pays a tax rate of 10 percent on the first $9,225 of his income, or $922.50. He would then pay the appropriate rate on his income in the next bracket, $9,226 to $37,450, up to and including the rate for the bracket $90,751 to $189,300, Investopedia explains.
Progressive tax systems draw heated debate, states Investopedia. Advocates argue that a progressive tax system is overall fairer, and it creates more government revenue. Opponents, meanwhile, claim that the law should not discriminate based on wealth, and progressive taxation distorts fairness, as higher-income individuals pay more while having the same level of government representation.Learn more about Income Tax