How Do Taxes Work? Tax Brackets 101

How much taxes do I pay? What do you mean the US has a progressive tax system? What is a progressive tax system? These are all common questions, and I’m going to answer all these and much more. I’m going to also show how the MKB Budget Setter tool can automatically estimate your monthly taxes for you, so you don’t need to calculate it by hand.

Full disclosure, I am NOT a tax expert. I did not study taxes nor do I have any licenses on the subject. I am simply going to explain how tax brackets in the US work and how you can estimate your taxes for budget-setting purposes only. For specific tax advice, please seek out a tax professional.

So what is a progressive tax system? Investopedia.com puts it well – “the United States has a progressive tax system…through which a higher percentage of tax revenues are collected from high-income individuals… rather than from low-income individual earners.” In other words, if someone is in the 22% tax bracket, not all of their income is taxed at 22%. As someone’s income increases, so does the percentage of taxes paid. It’s best if you see an example.

Watch the video below!

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