Carrie from CarefulCents.com gives a brief explanation of taxable income and tax brackets.
Determine taxable income
Take the total of all income (W2 or self-employed such as from a 1099) and subtract any exemptions or deductions.
The 6 tax brackets
Taxable income will then fall into one of six tax brackets: 10%, 15%, 25%, 28%, 33%, and 35%.
Carrie’s view of how the income is taxed
Carrie looks at her income as water and the tax brackets as a glass. The more income she makes the more glasses she will fill.
The amount of water she pours into the first glass will be taxed at 10%. If she makes more than the first “tax bracket glass” can hold then the overflow will go into the next tax bracket glass (15%), and so on. If she continues to reach certain income levels she will continue pouring until water flows into the 35% tax bracket glass. The water in these tax bracket glasses are taxed at higher rates.
What is “Effective Tax Rate”?
The effective tax rate is the average of the taxes charged from all the tax bracket glasses and the income she makes.
[...] Giving: Again, I would recommend tithing. Whether it’s better to do it this year or next year to take advantage of the tax deduction depends on how big of an income you earn next year as deductions phase out as earning levels increase. [...]