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2000 Marginal Tax Brackets

Your marginal tax bracket determines how much of the earnings from savings and investments you get to keep after taxes. Below are the four individual tax rate schedules for 2000:

Individual Tax Rate Schedules for 2000

	Taxable Income ($)	Effective Rate (%)
Married Filing Jointly	0 to 43,850	15
	43,851 to 105,950	28
	105,951 to 161,450	31
Head of Household	0 to 35,150	15
	35,151 to 90,800	28
	90,801 to 147,050	31
Single	0 to 26,250	15
	26,251 to 63,550	28
	63,551 to 132,600	31
Married Filing Separately	0 to 21,925	15
	21,926 to 52,975	28
	52,976 to 80,725	31

There are also two higher tax brackets, 36% and 39.6%. These are for high-income taxpayers with incomes exceeding the upper limit of the 31% rate. Once you know what marginal tax bracket you are in, you can use this information to make saving and investment decisions. Your goal, of course, is to keep as much as you can, after taxes. The chart below shows the taxable equivalent yields for various rates of return on tax-exempt products (e.g., municipal bonds, tax-exempt money market funds).

Tax-Exempt and Taxable Yields Compared*

Tax-Exempt Yield (%)	Taxable Equivalent Yield (%) for Tax Rate of:
	15% Tax Bracket	28% Tax Bracket	31% Tax Bracket
2.0	2.35	2.77	2.90
3.0	3.53	4.17	4.35
4.0	4.71	5.55	5.80
5.0	5.88	6.94	7.25
6.0	7.06	8.33	8.70
7.0	8.24	9.72	10.14
8.0	9.41	11.11	11.59
*Federal income tax rates only. Does not include state income tax.

If you cannot find a specific rate on the chart, you can compare tax-exempt and taxable yields by using the following formula:

Taxable equivalent yield = tax-free yield divided by (100% - marginal tax bracket %)

EXAMPLE: Assume you are in the 28% tax bracket, and have an investment with a 6.5% tax-free yield. To get the equivalent taxable yield, divide 6.5% by 72% (100% - 28%). The taxable yield is 9.03%.

Once you know how to calculate tax equivalent yields, it's time to go shopping and compare rates of return offered on various investment products. Next, determine which will pay a higher after-tax rate.

Generally speaking, people in the 15% tax bracket earn more after taxes with taxable saving and investment products. Those in higher tax brackets, usually do better with tax-exempts.