You’d be amazed how much difference even a little financial breathing room can make. When you start playing offense rather than defense financially, your financial goals suddenly start looking reachable. In turn, you start getting excited about the direction of your finances — and your life in general.

Let’s say you’re married filing jointly and your household taxable income (the portion of your total income that can be taxed) is $120,000. That puts you in the 22% tax bracket. But that doesn’t mean all of your income is taxed at 22%. That’s because U.S. tax rates are marginal, which just means that each tax rate applies to only part of your income. Some of your income is taxed at 10%, another piece at 12%, and so on depending on how high your income is. So, for this example, after all the damage is done, you and your spouse owe $17,980 in taxes for the 2021 tax year. Here’s how the numbers break down:

Alright, let’s go back to your high school civics class for just a second. The U.S. tax system is progressive—that’s just fancy tax talk that means the higher your taxable income, the more you’ll pay in income taxes. Your tax rate (the percentages of your income that you pay in taxes) is based on which tax bracket (income range) you’re in. Here are the tax rates and tax brackets for the 2021 tax year.3  2021 Federal Income Tax Brackets and Rates for Taxable Income Tax Rate  Single Filer Married, Filing Jointly Married, Filing Separately Head of Household 10% $0–9,950  $0–19,900 $0–9,950 $0–14,200 12% $9,951–40,525 $19,901–81,050 $9,951–40,525 $14,201–54,200 22% $40,526–86,375 $81,051–172,750 $40,526–86,375  $54,201–86,350 24% $86,376–164,925 $172,751–329,850 $86,376–164,925 $86,351–164,900 32% $164,926–209,425 $329,851–418,850 $164,926–209,425 $164,901–209,400 35% $209,426–523,600 $418,851–628,300 $209,426–314,150 $209,401–523,600 37% Over $523,600 Over $628,300 Over $314,150 Over $523,600 Let’s say you’re married filing jointly and your household taxable income (the portion of your total income that can be taxed) is $120,000. That puts you in the 22% tax bracket. But that doesn’t mean all of your income is taxed at 22%. That’s because U.S. tax rates are marginal, which just means that each tax rate applies to only part of your income. Some of your income is taxed at 10%, another piece at 12%, and so on depending on how high your income is. So, for this example, after all the damage is done, you and your spouse owe $17,980 in taxes for the 2021 tax year. Here’s how the numbers break down: Tax Calculation for $120,000 Taxable Income (Married Filing Jointly) Tax Bracket Income x Bracket % Taxes Due 10% $19,900 x 10% = $1,990 12% ($81,050 - $19,900) x 12% = $7,338 22% ($120,000 - $81,050) x 22% = $8,569 Total Taxes Owed = $17,897 If you have questions about how much you owe in income taxes this tax season, you might want to get in touch with a trustworthy tax advisor who can help you figure out those numbers.

In general, states take one of three approaches to taxing residents and/or workers:No tax income at all.Flat tax. That means they tax all income, or dividends and interest only in some cases, at the same rate.Progressive tax. That means people with higher taxable incomes pay higher state income tax rates.If, like most people, you live and work in the same state, you probably need to file only one state return each year. But if you moved to another state during the year, lived in one state but worked in another or have, say, income-producing rental properties in multiple states, you might need to file more than one.