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Bracket. Yeah. That's a decent increase. Speaker 3 (02:35): Yeah. And so you can use that. So let's say that you're making $80,000 a year as a couple. You know, you, you might say, Well what good is that to me? Well, what it means is that if you wanna do, if you wanna relocate some things from your tax deferred bucket, for example, to your tax free bucket, you wanna do a Roth conversion that gives you another $6,000 that you can do and still be in the 12% bracket. Speaker 2 (02:58): Hmm. I do have a question about, uh, tax brackets. Yes. I don't wanna get too far off, uh, but you know, me trying to figure things out. Exactly. So you said that the jump is from 12% to 22%? Yes. So if, so that's it. You're either in the 12 or in the 22. Correct. Is that how it works? Speaker 3 (03:15): It's a good question because it's not like it applies to everything before it, It's not like 22% will apply to all of your income. It's, it's a, it's a, it's a stairstep kind of a thing. Okay. It's tiered. So the first, um, and now the first this year, $20,550 you'll pay 10% on and then you go up to 12% and you stay at 12% on those marginal dollars on the next dollars until you get to 83 5 50. And then when you get to that point at 83 5 51, you start paying 22% on those dollars. So, Oh, okay. Your, your effective rate, your average tax rate, it's actually below your marginal rate. Speaker 2 (03:58): I see. Speaker 3 (04:00): Um, and it's even, it's even a little bit more confusing cuz there are things like the standard deduction and deductible expenses and other things that might come off of your income before you figure out the tax. But just to make it easy at the highest level that you wanna stay, you want to go right up to that step and not step up to the next one. Now, if you did, it wouldn't be catastrophic because if you go $10 over, you're gonna be tax 22% on those $10. Right. You'll still be 12% for the, for that and 10% below that. But, but it just gives us more room to work in. Speaker 2 (04:33): And there's a new standard deduction. Speaker 3 (04:34): There is a new standard deduction, which is even better. So your standard deduction, it used to be that, that you could deduct all kinds of things and you'd file a schedule with all of your itemized deductions on it of some time ago they went to a standard deduction and in the last presidential administration they doubled the size of that standard deduction. So now most people don't itemize at all. Most people just go with the standard deduction. Um, this year, 2022, if you're married, filing jointly, that standard deduction is $25,900. So the first $25,900 that you make, you actually don't get taxed on because you get to take the standard deduction that much comes off your income. Okay. Next year it's going to be $27,700. So almost another $2,000 of income won't be taxed. And if you're in a nice low bracket, again, you can make a lot of use of that. What else can you do within that 27,007? Um, that is not gonna incur any tax for you. So that's good news too. Speaker 2 (05:35): When was the last time this much good news came out of the irs? I'm just curious. Speaker 3 (05:39):

35 - New IRS Limits 10-31-22 (Completed 11/01/22)

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