Enjoyed this video? Then subscribe to the channel right now, and as a next step let's dive into the related concept of effective tax rate for corporations: th-cam.com/video/Ep2kJtzOmmY/w-d-xo.html
This video was so helpful. I couldn’t find anyone else who would explain marginal tax rate and I kept dividing rates by 1 I’m so glad I’m not going in circles anymore lol
You know, I spent about 6 hours trying to figure out how to find the taxed owed, when all I simply had to do was split up the taxable income by each bracket... Thank you!
Thanks a bunch! This really helped me understand calculating the different tax rates. I honestly thought that the marginal tax rate was also a calculation until I saw this video.
Thank you very much, Christian! Marginal tax rate is a very important topic for both taxpayers as well as those setting tax policies and rates to understand. My advice to politicians: best to keep it simple and transparent, to avoid unintended side effects.
The Finanace Storyteller No, thank you for explaining it because I was totally wrong in my thinking on how marginal tax rates work. I was way off but your tutorial put this all in perspective. I was wondering how this would work for a multi-billion dollar corporation where every three months, the company makes a constant billion dollar profit, or more, and how that would make the average tax on income look like. No one else has put together this scenario on TH-cam yet. Again, thanks for shedding light on the marginal tax system. Robert...
Thanks, Robert! Here's a suggested video for you. I have covered the concept of effective tax rate for large corporations in a video about Alphabet Inc's financial statements: th-cam.com/video/ToE-oggQiqQ/w-d-xo.html
Happy to help! I use it all the time in the planning of my personal finances. Very very important to understand what the net after-tax impact is of working a bit more or a bit less.
I watched a different video to where they instead used the brackets as pockets. Explaining you have to fill each pocket before moving on to the next. In your first example, the first 20,000 was taxed at 0. Which would leave 30,000 left, why was the 30,000 not placed into the next bracket/pocket (from 20,001 - 40,000) which would make the 30,000 taxed at 30%
Hello David! I like the metaphor of comparing brackets to pockets you have to fill. In response to your question: the $30,000 cannot be placed fully into a bracket that only has a size of $20,000. :-) $40K (upper limit of bracket) minus $20K (lower limit of bracket) is $20K. Therefore, $20K goes into that second bracket with a 30% tax rate, and the remaining $10K goes into the next bracket which is taxed at a 40% rate.
I understood here that what is marginal and average tax rate system......Sir can you please make a video on effective and statutory rate system?.....because your explanation is very good.
Thank you for the kind words, Ethan! Please subscribe and spread the word! My video on effective tax rate might also be of interest to you: th-cam.com/video/Ep2kJtzOmmY/w-d-xo.html
Doubt : If the marginal tax rate is the tax rate an individual would pay on 1$ additional of income. - if John had income of 60K the next 1$ will fall in 50% bracket - so the marginal tax rate should be 50% and not 40% ?
Agree. In the video, I walk through the example of John going from $50K to $60K in income, which would be taxed at a marginal tax rate of 40% in the example. Once he is at the $60K level, the next $1 will be in the 50% bracket.
Hello Jaime! I made up both the brackets and the rates, although they are not too far from what is customary of where I live in Western Europe.... The main point of the video is to show how the calculations work.
You're welcome. Yes, I think we are talking about the same thing: the marginal tax rate is the one for the bracket that the "last"/"highest" part of your income falls into.
@@TheFinanceStoryteller Well, that's true about her life, but I work in a tax office and I have never seen anyone see it that way after getting a big tax bill. :) However, I agree with you. I often told clients that taxes were a sign of financial success. They assented to the truth of that statement but wouldn't always take it to heart. :)
No wonder the big city Midgard has slums under it, the tax rate tho... (hope you know the reference :) Still I don't know this progressive tax rate exist in other country, in mine this rate is used (one of them) to those who are a 'permanent employee' in a company and you get kinda fixed amount of salary every month
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Enjoyed this video? Then subscribe to the channel right now, and as a next step let's dive into the related concept of effective tax rate for corporations: th-cam.com/video/Ep2kJtzOmmY/w-d-xo.html
This video was so helpful. I couldn’t find anyone else who would explain marginal tax rate and I kept dividing rates by 1 I’m so glad I’m not going in circles anymore lol
Happy to help, Ethan!
You know, I spent about 6 hours trying to figure out how to find the taxed owed, when all I simply had to do was split up the taxable income by each bracket... Thank you!
You're welcome, Syntaj! When at first you struggle, and then find out how it works, you will never forget it.
Thanks a bunch! This really helped me understand calculating the different tax rates. I honestly thought that the marginal tax rate was also a calculation until I saw this video.
You're welcome, Angel Serene! Happy to help. :-)
Excellent video explaining marginal tax rate - haven't yet heard any politician explain this in an understandable way !!!
Thank you very much, Christian! Marginal tax rate is a very important topic for both taxpayers as well as those setting tax policies and rates to understand. My advice to politicians: best to keep it simple and transparent, to avoid unintended side effects.
Thank you so much . I was struggling for this all over the TH-cam. Finally 😊👍
Thank you, Manoj! I'm here to help!
Thanks for this. My textbook wasnt making sense, even though it seems a very simple concept after you explaining!
Great to hear! Please share with fellow students, and let's ace that upcoming test!!!
Superbly explained. Nice job.
Thank you! :-)
The Finanace Storyteller
No, thank you for explaining it because I was totally wrong in my thinking on how marginal tax rates work.
I was way off but your tutorial put this all in perspective. I was wondering how this would work for a multi-billion dollar corporation where every three months, the company makes a constant billion dollar profit, or more, and how that would make the average tax on income look like. No one else has put together this scenario on TH-cam yet. Again, thanks for shedding light on the marginal tax system.
Robert...
Thanks, Robert! Here's a suggested video for you. I have covered the concept of effective tax rate for large corporations in a video about Alphabet Inc's financial statements: th-cam.com/video/ToE-oggQiqQ/w-d-xo.html
Just woww.
I had so much difficulty in understanding the concept, very thankful to you!!
Happy to help! I use it all the time in the planning of my personal finances. Very very important to understand what the net after-tax impact is of working a bit more or a bit less.
I watched a different video to where they instead used the brackets as pockets. Explaining you have to fill each pocket before moving on to the next.
In your first example, the first 20,000 was taxed at 0. Which would leave 30,000 left, why was the 30,000 not placed into the next bracket/pocket (from 20,001 - 40,000) which would make the 30,000 taxed at 30%
Hello David! I like the metaphor of comparing brackets to pockets you have to fill. In response to your question: the $30,000 cannot be placed fully into a bracket that only has a size of $20,000. :-) $40K (upper limit of bracket) minus $20K (lower limit of bracket) is $20K. Therefore, $20K goes into that second bracket with a 30% tax rate, and the remaining $10K goes into the next bracket which is taxed at a 40% rate.
Jim was too funny, thanks for the great video!
Glad you enjoyed it, Soung! Jim is The Man!!! 😎
I understood here that what is marginal and average tax rate system......Sir can you please make a video on effective and statutory rate system?.....because your explanation is very good.
Thank you for the feedback and the suggestion, Deepti! I have added "effective tax rate and statutory tax rate" to my list of video topis for 2020.
This was a great explanation. Thanks!
Glad it was helpful, Kat! Thank you for watching and commenting.
Incredible video. Thank you so much!
Thank you for the kind words, Ethan! Please subscribe and spread the word! My video on effective tax rate might also be of interest to you: th-cam.com/video/Ep2kJtzOmmY/w-d-xo.html
Thankyou. Easy and detailed
Glad it was helpful, Farshan! Thank you for watching and commenting.
thank you so much ! love the storytelling
You're welcome! :-)
Thank you sir! That was crystal clear haha
Glad to hear it!
Very good explanation bro... Helped me lot
Glad to hear that!!! Thank you.
Doubt : If the marginal tax rate is the tax rate an individual would pay on 1$ additional of income. - if John had income of 60K the next 1$ will fall in 50% bracket - so the marginal tax rate should be 50% and not 40% ?
Agree. In the video, I walk through the example of John going from $50K to $60K in income, which would be taxed at a marginal tax rate of 40% in the example. Once he is at the $60K level, the next $1 will be in the 50% bracket.
@@TheFinanceStoryteller So in simple words, marginal tax rate is the tax rate slab in which your last $ of current income falls ?
@@heyitsdeepankar Yes, that sounds like an accurate description.
Thank you 🙏
You’re welcome 😊
Nicely explained 👍
Thank you 🙂
Are these real taxable income bracket numbers for everyone? I live in New Jersey. Please help
No, these are just examples. You should be able to find current tax rates and brackets on the websites of your federal/state government.
Thank you very much!!
You're welcome! Happy to help.
Genius saved my econ marks
Happy to help, Omar! Please subscribe, and spread the word about the channel!
What’s the criteria for the income split? Or it’s just an arbitrary example?
Hello Jaime! I made up both the brackets and the rates, although they are not too far from what is customary of where I live in Western Europe.... The main point of the video is to show how the calculations work.
Thanks for the video! Quick question: so in USA, should individual use marginal tax rate with the tax table brackets?
You're welcome. Yes, I think we are talking about the same thing: the marginal tax rate is the one for the bracket that the "last"/"highest" part of your income falls into.
Very good explanation Sir. But why is Jane smiling with a tax bill like that?? :)
She's not that bothered about it. In Jane's view, she still makes more than enough on a net basis to lead the life she wants.
@@TheFinanceStoryteller Well, that's true about her life, but I work in a tax office and I have never seen anyone see it that way after getting a big tax bill. :) However, I agree with you. I often told clients that taxes were a sign of financial success. They assented to the truth of that statement but wouldn't always take it to heart. :)
Agree!
No wonder the big city Midgard has slums under it, the tax rate tho... (hope you know the reference :)
Still I don't know this progressive tax rate exist in other country, in mine this rate is used (one of them) to those who are a 'permanent employee' in a company and you get kinda fixed amount of salary every month
Most systems around the world contain progressive aspects. Read up on it, fascinating topic!
wtf is an one additional dollar of income😭 ive searched and search and it makes no sense
An extra dollar that you make when you work more.
every fucking farmer needs to understand this video so that they might one day vote blue.
Agree! It's very important to understand.
Blue in Canada and Red in the USA
So damn confusing. Still lost.
Sorry to hear that, John! Maybe watch the video again, and check other sources on the topic as well?
@@TheFinanceStoryteller yes
It wasn't your fault. I was just very confused.
I saw a few more videos and read more about it and have a better idea.
Nice to hear that, John!