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2002 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 2002:

Individual Tax Rate Schedules for 2002
  Taxable Income ($) Effective Rate (%)
Married Filing Jointly 0 to 12,000 10
12,001 to 46,700 15
46,701 to 112,850 27
112,851 to 171,950 30
Head of Household 0 to 10,000 10
10,001 to 37,450 15
37,451 to 96,700 27
96,701 to 156,600 30
Single 0 to 6,000 10
6,001 to 27,950 15
27,951 to 67,700 27
67,701 to 141,250 30
Married Filing Separately 0 to 6,000 10
6,001 to 23,350 15
23,351 to 56,425 27
56,426 to 85,975 30
Higher 35% and 38.6% marginal tax brackets are also in effect for higher income taxpayers with incomes above the upper limit of the 30% rate.

Tax-Exempt and Taxable Yields Compared*
Tax-Exempt Yield (%) Taxable Equivalent Yield (%) for Tax Rate of:
15% Tax Bracket 27% Tax Bracket 30% Tax Bracket
2.0 2.35 2.74 2.86
2.5 2.94 3.43 3.57
3.0 3.53 4.10 4.29
3.5 4.18 4.79 5.00
4.0 4.71 5.48 5.71
4.5 5.29 6.16 6.43
5.0 5.88 6.85 7.14
5.5 6.47 7.53 7.86
6.0 7.06 8.22 8.57
6.5 7.65 8.90 9.29
7.0 8.24 9.59 10.00
7.5 8.82 10.27 10.71
8.0 9.41 10.96 11.43
*Federal income tax rates only. Does not include state income tax.

If you cannot find a specific rate on the chart you can compare yields by using the following formula:

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

Example: Assume you are in the 27% tax bracket, and have an account with a 4.5% tax-free yield. To get the equivalent taxable yield, divide 4.5% by 73% (100% - 27%). The taxable yield is 6.16%.

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 10% and 15% tax brackets earn more after taxes with taxable saving and investment products. Those in higher tax brackets, usually do better with tax-exempts.