How do taxes work when you progressively make more money?

You progressively pay more in taxes.

You progressively pay more taxes.

The rate of tax on additional earnings is called the marginal tax rate. For federal income tax, the maximum marginal rate is under 40%, so if you earn an additional $1,000,000, your federal income tax would go up by something less than $400,000. State income taxes would be in addition to this.

You file each year for what you made that year. If you make more money and nothing else changes, your tax goes up.

You pay taxes one a year. How much you pay for taxes are determined by how much you earn (per year, day, hour, etc.) and important things you have, such as your car and house. Taxes don't really change based on how much money you have. So you only need to pay a small amount of money once a year, so 364 days of the year, you're earning more and more money.

Pre-just approved changes, the top tax bracket was 40%. (Not sure what it is now.) That applied to a single person making over $415,000 or a married couple making over $466,000. 40% is the cap. If you make $500k or $2m, that is the highest rate you will be charged.

ideally as your earnings increase, you are placed into a higher level of taxation where a higher percentage is deducted. BUT. there are a lot of tax laws regarding what sort of income and things you own are taxed so there are many cases where very wealthy people can place their money into different styles of investments like housing, or different styles of funds that are tax exempt meaning that they end up actually paying a lower percentage of tax than many other people that earn a lot less.

I just saw the additional details you posted.

its not a directly linear relationship. so if you earn $500,000 and are taxes at lets say 30%, if you make a million the next year you wont be taxed 60%. instead it may be something like 45%. it all really depends on where you live and the tax brackets that are created.

one thing that makes taxes easy to live with though it often sounds complicated is that when you get paid at work, your job will often ask you about any money you are making on the side, if you are married and if you have kids which will affect how you are taxed. this means that they know how much to automatically deduct from your paycheck every month. at the end of the year, you then get a form from your work saying how much you made and how much of that was deducted. you will get this from any place that earns you money. at the end of the year, you total up how much you earned and how much was deducted and hopefully what you got deducted was exactly how much you were supposed to pay in taxes. if you were accidentally deducted more than you were supposed to then the government gives you a tax refund. if you were not deducted enough then you pay the remaining balance.

This is where tricky tax law comes into place. when you file your taxes, a shady tax accountant will tell the government that your money is invested into things that are taxed less.

take for example starting a company in a tax haven like Panama or Cayman Islands. People will report that the earnings from their businesses in taxed countries are actually profits of the different company in the tax haven. that way when they report their taxable earnings, they are being taxed on less than what they actually earned.

The rest of the question: So I'm hearing that the more money you make, the more you end up paying in taxes. That the money you owe to the government goes up, and it has me wondering... where does the percentage of the money you owe to Uncle Sam end? For example, if I make $500,000 this year and the government takes away 50% of my income from taxes, what would happen if I make $1,000,000 next year? Will they take 100% of my income. And it also has me pondering the fact that when you make more money, they take more. If I wanted to legally own $1,000,000 then they'd take a percentage of it, which would mean that I wouldn't have reached my income goal in terms of owning the whole million dollars. What if I made $2,000,000? Would I be owning $1,000,000 after taxes have been paid? I hope my questions are making sense. The tax subject is still fairly new to me.