How Do Tax Brackets Actually Work?

It takes the average American 13 HOURS to file their taxes... yet few of us know how they're calculated!

Two Cents on Twitter: @twocentspbs

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Two Cents was created by Katie Graham, Andrew Matthews, Philip Olson CFP® and Julia Lorenz-Olson and is brought to you by PBS Digital Studios. We love dropping some knowledge on all things personal finance and helping you make better money decisions.

Two Cents is hosted by Philip Olson, CFP® and Julia Lorenz-Olson
Directors: Katie Graham & Andrew Matthews
Written by: Andrew Matthews
Executive Producer: Amanda Fox
Produced by: Katie Graham
Edited & Animated by: Derek Borsheim
Images by: Shutterstock
Music by: APM

SOURCES:

[nunya]

I love that you explain complicated things simply, but you don't talk down to your audience. You find a great balance.

[leeklinglesmith]

You should do a video on common tax deductions and tax credits. Like the standard deduction, child tax credit, etc.

[NickPeitsch]

Some people think it’s better to avoid a raise so they don’t enter the next tax bracket ...

But they don’t realize that it’s incremental!

Good clarity 👍

[fmaz]

At 1:10: One of the main reason why taxes are so complicated to file in the US is because Intuit (makers of TurboTax) have lobbied against simplified filling for decades.

[b.sharp.]

The richer you are, the more available tax deductions are to you, as well as more expensive tax professionals to help you find ways to save on taxes. Also, the reason why our tax system is one of the most complex is NOT because we have a progressive tax system!!! Not even remotely. It's about the format, countless loopholes, and (most importantly) the fact that each citizen has to completely figure out and submit our taxes then the government checks it over for mistakes. While in other countries, it's the exact opposite!! The government files everyone's taxes and submits them to each citizen, where they may look over it and see if there are any additional income sources or deductions that were missed

[sammierose]

I think the main problem with the United States tax system (that I think most of us can agree on) is that it’s not used correctly by the government to fund public service adequately enough 🤷🏽‍♀️

[juancruzcarugnoenrico]

Boring channel: please don't argue in the comment section
Two Cents: WE WANT BLOOD AND TEARS

[money]

why In the hell werent we taught this in school, this is making me extremely angry
I would say 60% of things that were taught in high school are completely useless as an adult

[jsteele]

The system of tax brackets isn't that complicated - it's the tangle of tax deductions and tax credits (plus the other categories of taxed wealth, like capital gains, dividends, inheritance, etc.) that confuses people. I think we'd all love to see a video about that!

[pallas]

Belgian here. It's true, our taxes are huge and we are only talking about income tax in this video. You'd be amazed at the plethora of all other tax rates we pay here!

[ishaanarora]

India also has progressive tax and we were taught this tax calculation in 10th grade, disguised as mathematics. And I feel thankful to my education system for doing one thing right in my education.

[cherlopes]

I'm not North American and I really need to learn more about finances in my country. But I can't help myself...I have to watch all your videos. 🙈

[AverageJoeInvestor]

*GREAT VIDEO GUYS* | Yes, our tax system is complicated, but that’s partly due to the government wanting to push or incentivize certain types of activities such as rental properties, self-employed businesses, depreciating assets, etc. BUT we do end up taxing higher earners a lot more than we tax lower-income earners when factoring in deductions. VERY SIMPLE AND GOOD EXPLANATION! 😎👍🏻

[crusader]

Personally, I don't mind having to pay taxes, I've always held the mantra of 'Taxation is the price you pay for living in a civilized society.' Greetings from the UK! Really enjoy the insight into life in the USA that your videos give!

[jamesboone]

Love your show guys. I learn a lot I wish you would post more videos.

[traplover]

Only criticism is the usage of the word "fair", a morally loaded term, when talking about proportional taxation. "Fairness" can be argued for any type of taxation as "fairness" is a subjective term, not so much an objective analysis.

[abbywilhelm]

I’ve never had this explained to me before! Thank you for educating me.

[ChrisInvests]

Many people don't realize that if they earn $5, 000 in the 25% tax bracket, only that $5, 000 is taxed at 25% 🤷‍♂️

[ChemistrywithDrB]

I don’t mind paying taxes. I just mind having to take hours of my time to file complicated tax returns in order to do it. The IRS should do this for us, plain and simple.

[JPWRana]

Funny how they didn't talk about capital gains in this video... Which is how most of rich people actually earn their money. Those tax rates are way lower.