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Why Do Tax Brackets Matter?

Did you know that if your tax bracket goes from 15 percent to 25 percent, for instance, that this does not mean an increase of 10 percent in taxation.  Actually what it means is a 67 percent increase in taxation! The IRS calculates the increase by dividing this 10 percent change by 15 percent, which equals 67 percent. It designed this system so that when you make more money, you have to pay more taxes, but not just the percentage by which your tax bracket changed, but exponentially using hidden calculations.
Few people monitor their income to see how close they are getting to the  next increase in taxation.  If you are close to the next tax bracket, all you have to know is you are close, then you can do something about it.  You could place $5,000 into an IRA or many other strategies to keep from going higher.
What is so sad is to see people just hand over their tax information and then ask the preparer to just get it done.  Then most of the time we trust the tax preparer and sign the return and send it off.  With good records, a better understanding of tax deductions and tax brackets, and some forethought, the average employee can be saving $1,000 to 3,000 in taxes every year. Go to www.moneymastery.com for more information on how to reduce your tax burden by up to 50 percent.

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