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It's an unfortunate fact of life, but the more you earn, the more the Internal Revenue Service will take from your earnings. The amount of your income that's actually taxable depends on your adjusted gross income -- or AGI -- minus whatever deductions you qualify for. However, the percentage you pay of that taxable income also depends on your filing status. Two individuals can earn the same amount, but one might pay a higher percentage in taxes because of other factors.
Filing a separate married return puts you in the unkindest tax bracket. If your AGI is between $71,351 and $108,725 in 2012, you'll fall in the 28 percent bracket. If you earn up to $194,175, you fall into a 33 percent tax bracket. If you earn more than that, it's 35 percent.
If you file a joint married return and combine your income with your spouse's, you'll report more income but the percentages are more favorable. For example, if you earn $110,000 of taxable income and file a separate return, your marginal tax rate is 33 percent. If you file a joint return, however, and if you earn $110,000 and your spouse earns $100,000 for a total of $210,000 in taxable income, you fall in the 28 percent bracket. Joint filers can earn up to a total of $142,700 in taxable income and stay in a 25 percent bracket; they can earn up to $217,450 to remain in a 28 percent bracket; and they can earn up to $388,350 to stay in the 33 percent bracket. You can file jointly as long as you're not divorced or separated by court order by the last day of the tax year.
If you're legally separated or divorced by December 31, you must file either a single return or – if you qualify – you can file as head of household. If you file a single return, you can earn up to $178,650 in taxable income and remain in a 28 percent tax bracket, about $70,000 more a year than a married taxpayer filing separately. The 33 percent bracket extends to $388,350, the same as for married taxpayers filing jointly.
Head of household filers fall into the best tax bracket, but several rules apply to this filing status and not everyone qualifies. If you're not divorced or legally separated by court order before December 31, you cannot have lived with your spouse any later than June 30 of the tax year. You must have a dependent, either your child or someone else who relies on you for support and meets IRS rules. You must have paid more than half of what it costs to maintain your home for the year. If you meet the qualifying criteria, you can earn up to $198,050 and still fall into the 28 percent bracket. The 33 percent limit is the same as for single and married filing jointly taxpayers: $388,350. If you earn more than this, you'll fall in a 35 percent tax bracket.
If your spouse dies during the tax year, you can still file a joint married return for that year and take advantage of those tax rates. After that, if you have a dependent child, you can usually file as a qualifying widow or widower, provided you don't remarry. If you choose this filing status, you can continue to use the married filing jointly tax brackets for up to two more years.