In the United States the tax system is based on a progressive , or graduated formula. Low income individuals pay 15 percent of their income in taxes and above that level income is taxed at progressively higher rates, ranging from 28 percent to 39.6 percent. Your effective tax rate is the actual percentage of your gross income that you pay the federal government in taxes. You can use each of these to build wealth. Always remember that there is a big difference between tax avoidance and tax evasion.
Tax avoidance is the legal effort to reduce one's tax liability through means sanctioned by law.
Tax evasion is the illegal attempt to withhold those taxes that are lawfully due. Tax deferred investments include US Savings Bonds and growth stocks. Tax credits reduce your taxes one dollar for every dollar of credit. The following is a list of questions you must be prepared to answer before going to your tax accountant.