LindaS5247
Expert Alumni

Get your taxes done using TurboTax

As Bsch4477 mentions above, the difference is due to the fact that  different forms of income are taxed at different rates. Your tax bracket relies on using your taxable income to determine the amount of your federal taxes owed. 

 

Not all income is treated the same for tax purposes. Income you earn from your job gets taxed through the tax brackets used on ordinary income. Long-term capital gains, on the other hand, are taxed at a rate between 0% and 20%, depending on your income level. 

 

No matter what type of income you make or the tax bracket you’re in, your goal should be to get your effective tax rate as low as possible.  The actual percentage of your taxable income that goes to the IRS is referred to as your effective tax rate. Your effective tax rates determine what percentage of your taxable income is being paid in tax.


 

Click here for What is My Tax Bracket?


Click here for What is a Tax Table?


 

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