The Income Tax Rate is…Variable?
Have you noticed that the income tax rate is one of the most contentious topics?
That’s because it is always changing. There’s no argument that the income tax rate of tomorrow is likely to be different than it is today, and you must plan your financial strategy accordingly.
Let's have a look...
The current income tax rate is at an all-time high of 39.6% (well, if you overlook the whopping rate of 70% between 1965-1981 or the four-year stint at 50% between 1982-1986).
Either way, since 1987, the income tax rate has been shifting around anywhere between 30% to the current rate at almost 40%- and this doesn’t include adjusted rates for other tax brackets.
Why is the Income Tax Rate So Important?
Well, you already know that what you pay in income tax affects your overall cashflow, but what you probably don’t realize is that your income tax and investment tax can have an impact on what you pay in Social Security. You can learn more about that here.
Otherwise, it’s a simple concept. Understanding how your income is taxed affects what you pay in overall taxes, including your:
- Interest Income
- Rental Income
- Dividend Income
- Capital Gains
- Retirement Distributions
- Annuities Distributions
- Social Security Distributions
But, your financial planning shouldn’t end there.
Your Income Tax Rate Can Change
There’s no need to reference the federal budget on this topic. It’s safe to assume the income tax rate is subject to change. If your financial plan hinges on your current income tax rate, you could be in for a serious setback if that rate changes. It’s important to have a dynamic plan in place that has room to change as the market changes. Register for a free workshop or one-on-one consultation today.