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Tax-Reduction Strategies Marginal Income Tax Brackets If your taxable income fell above these thresholds in 2007, then you were in the 25% federal tax bracket or higher. If you were in the 25% federal marginal tax bracket or above in 2007, then you were in a high tax bracket, which means that tax-oriented investments and tax planning strategies can save you a lot of money.   Quick Question If I'm in the 25% federal marginal bracket, does that mean that all of my income is being taxed at the 25% rate? A. Only the additional taxable dollars over these thresholds are taxed at the 25% bracket or higher. Dollars less than this threshold are taxed at a rate of 15% or more. B. Only the additional taxable dollars over these thresholds are taxed at the 25% bracket or higher. Dollars less than this threshold are taxed at a rate of 15% or less. C. The additional taxable dollars over these thresholds are taxed at the 25% bracket or higher and the dollars less than this threshold are taxed at a rate of 25% or less. D. Only the additional taxable dollars under these thresholds are taxed at the 25% bracket or higher. Dollars less than this threshold are taxed at a rate of 15% or less. One of the provisions of recent tax acts is that our marginal tax brackets have been lowered gradually between 2001 and 2006. Due to other recent legislation, this has been extended until 2010. If your taxable income remains the same, you may be in a marginal bracket that is 3-5% less. If you reside in a state that has state income taxes, don't forget to add your state's marginal tax rate to your federal rate. < PREVIOUS NEXT > #40213