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Despite fresh tax rate reductions of your Jobs and Growth Tax Relief Reconciliation Act of 2003, the top marginal tax bracket for many retirees is a whopping forty-six.3%. Why? Because Social Security benefits are subject to income tax. Those affected are Social Security recipients who have the good fortune (misfortune?) pertaining to being subject to both the 25% income tax bracket and also the 85% inclusion rate for Social Security benefits.
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Remember, an individual exemption of $3650 is not deducted on tax but on your taxable income. Say for example your filing status is 'married filing jointly' with original taxable income of $100,000. This makes you under the marginal tax rate of 25%. So the money you save on personal exemption is $912.50 (calculation is simple: $3650 multiplied by 25%). For is they spouse, that will be multiplied by two in which means you save $1825.
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Basically, the reward program pays citizens a amount of any underpaid taxes the internal revenue service recovers. An individual between 15 and 30 percent of the amount the IRS collects, use keeps the check.
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