Tax Calculations

After adding up all the income and taking all the deductions, we have arrived at the net taxable income amount. Based on that number, the income tax is calculated from the tax brackets that

are adjusted annually for inflation. The tax rates range from 0% to 37%, depending on the type of income tax, as follows:

Wages, non-exempt interest (per 1099-Int), non-qualified dividends (per 1099-Div), rents, royalties, business profits, net short-term capital gains (gains from the sale of an asset held for less than one year and one day) – all taxed at “ordinary rates” of up to 37%.

Qualified dividends (per 1099-div) and net long-term capital gains (gains from the sale of an asset held for one year and one day) – both are taxed at the reduced “long-term capital gain rates” of up to 15% and 20% for certain high-income taxpayers (with the taxable income higher than $492,300 for single, $523,050 for head of household, and $553,850 for married filing jointly).

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