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Common Tax Phrases for
Pilots and Flight Attendants
2% Limit
A.G.I. (Adjusted Gross Income)
Above the Line Deductions
Accountable Plan
Actual Cost Meal Deduction
Adequate Records
Alternative Minimum Tax
Below the Line Deductions
CPA (Certified Public Accountant)
Commuting Expenses
D.O.T. (Department of Transportation)
Day Trips
Department of State
Documentary Evidence
Effective Date
Effective Tax Rate
Employee Business Expenses
Enrolled Agent
Expiration Date
General Services Agency
Gross Income
Hours of Service Limits
IRS Form 1040
IRS Form 2106
IRS Publication 1542
IRS Publication 463
IRS Publication 529
Incidental Expenses
Indefinate Duty
Itemized Tax Deduction
Necessary Expense
Non Taxable Per Diem
Nonaccountable Plan
Ordinary Expense
Per Diem
Per Diem Calculator
Per Diem Deduction
Per Diem Rates
Personal Expense
Schedule A
Seasonal End Date
Seasonal Start Date
Special Per Diem Rates
Standard Deduction
Standard Meal Allowance
Standard Per Diem Rates
Substantiated Expenses
Tax Attorney
Tax Audit
Tax Bracket
Tax Credit
Tax Deduction
Tax Home
Tax Liability
Tax Preparer
Tax Software
Taxable Income
Taxable Per Diem
Temporary Duty
Transition Period
Transportation Workers
Travel Expenses

Tax Bracket

A taxpayer's tax bracket is simply the tax rate schedule that a taxpayer falls under corresponding for their taxable income.  A tax bracket will always be greater than a taxpayer's effective tax rate because various above-the-line deductions and below-the-line deductions are subtracted from the taxpayer's gross income, thus reducing his or her taxable income.  Again, it is taxable income that matters in the tax rate schedules (shown below) which determine a taxpayer's tax liability.

Another reason the effective tax rate is always lower than the rate associated with a tax bracket is that tax brackets are progressive (the rate increases as taxable income increases).  That means the income that a taxpayer earned was affected by all of the tax brackets below the highest one they enter.  Imagine a taxpayer is in the 28% tax bracket.  They are affected by the 10%, 15%, 25%, and 28% tax bracket.  An example of this is shown below. 

Tax brackets are often misunderstood by flight crewmember's because many believe that the instant their taxable income enters a higher tax bracket, that all of their taxable income is affected by the new tax bracket.  THIS IS NOT TRUE.  Only the amount that is over and above the threshold for a particular tax bracket is affected by the rate associated with that tax bracket.

Example:  Assume Beth is an airline pilot that has a gross income of $115,000 in 2008.  After she takes various deductions, Beth's taxable income is reduced to $93,400.  Assume Beth is single in 2008.  That would put Beth in the 28% tax bracket because her income was between $78,850 and $164,550.  Does that mean that Beth's entire taxable income is multiplied by 28%?  No.  Only the portion of her income that enters the 28% tax bracket is actually multiplied by 28%.  The remainder is multiplied by the multipliers of lower tax brackets.  The Add Column in the tax rate schedules below is the tax liability sum of all of the tax brackets below the current one, so to calculate Beth's tax liability, it would simply be:

 $16,056.25 + [($93,400 - $78,850) x 28%] = $20,130.25

In this example, her effective tax rate is $20,130.25 / $115,000 = 17.5%, which is obviously significantly less than her tax bracket.

2008 tax brackets, tax rate schedules, married, single, filing jointly, head of household

2007 tax brackets, tax rate schedules, married, single, filing jointly, head of household

2006 tax brackets, tax rate schedules, married, single, filing jointly, head of household

Airline Pilot Taxes and Flight Attendant Taxes

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