Reducing Your Tax Rate

Although you can't literally lower your tax rate, there are certain actions you can take that will have a similar result. These include:

When we say "tax bracket," we're referring to the highest federal tax rate that you pay on any of your taxable income. This is the rate that will apply to each additional dollar that you earn, until you earn so much that you graduate to the next bracket. You need to know your current tax bracket in order to make wise tax planning decisions, since many decisions will make sense for those in certain brackets, but not for those in others.

In 2001, the tax laws were changed to lower the tax rates across the board and create a new 10 percent income rate for 2001 through 2010. The dollar amounts at which each bracket begins is different for each filing status (that is, whether you file as single, head of household, married filing jointly, or married filing separately). The new tax rates for each year are as follows:


2001 to 2010 Tax Rates
Year Tax Rates
2001 10% 15% 27.5% 30.5% 35.5% 39.1%
2002-2003 10% 15% 27% 30% 35% 38.6%
2004-2005 10% 15% 26% 29% 34% 37.6%
2006-2010 10% 15% 25% 28% 33% 35%

For 2001, most taxpayers received the benefit of the new 10 percent tax rate through an advance rate reduction refund check. The maximum refund for single taxpayers was $300, $600 for married taxpayers filing jointly, and $500 for heads of households based on the filing status you claimed on your 2000 return.

The following chart shows the income thresholds at which each tax bracket begins for 2001. Note that the dollar amount does not refer to your gross income, but rather, your taxable income--that is, income after you've subtracted any deductions and personal exemptions to which you're entitled.

Taxable Rate Single Married/Joint Married/Separate Head of Household
15% $0.01 $0.01 $0.01 $0.01
27.5% $27,050 $45,200 $22,600 $36,250
30.5% $65,550 $109,250 $54,625 $93,650
35.5% $136,750 $166,500 $83,250 $151,650
39.1% $297,350 $297,350 $148,675 $297,350

Business Tools

Among the Business Tools are Form 1040 and IRS Tax Tables. They are in Adobe Acrobat .pdf format, and you will need Acrobat Reader 4.0 to view the files and print them. A free version of Acrobat 4.0 is available in the Business Tools area as well.