Given that Vaughn recently graduated from college, he ought to go for a pre-tax plan since his top marginal tax rate is probably going to drop in the future.
The rate of taxation applied to taxable income for each extra dollar generated is known as the marginal tax rate. It is a federal tax structure that is referred to as progressive. With the progressive tax system, people with more taxable income pay higher taxes, while those in the lower tax band pay lesser taxes. At each tax band, the system applies a separate tax rate.
In the past, taxpayers were separated into seven different tax brackets and lived in four different families. As a person's income rises in the tax bracket scale, the marginal tax rate system rises. It implies that a lower marginal tax rate will be applied to lower taxable dollar earnings.
Taxes are assessed at a greater rate as taxable income moves up a tax bracket. The rate gradually rises until it reaches the highest marginal tax rate on the final dollar.
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