Pin your investing to your tax bracket

Making a decision on your personal finances without knowing what marginal tax bracket you're in is rather like going into a store to shop for a suit without knowing your size - which is not to say that people don't do it.

Whether to invest in taxable or tax-free bonds, whether to buy housing or rent, and how to face capital-gains taxes (see story at left) - these are just a few of the questions best answered with a clear understanding of your tax situation.

''But so many people don't know what their marginal tax rate is,'' says financial planner Connie S. P. Chen. ''They look at the stub of their paychecks, divide tax withheld by their gross pay, and decide that they are in the 25 percent tax bracket, or whatever. But that's not right.''

The calculation she describes is, roughly, the one you can use to calculate your effective tax rate. The marginal tax rate, customarily defined as ''the tax imposed on the last dollar earned,'' is higher than your effective tax rate; and when people refer to their ''tax bracket'' they usually mean the marginal, not the effective rate.

You've probably noticed that if you get a raise of, let's say, $50 a week, you get to keep a smaller share of that last amount than of your gross pay as a whole.

Since your discretionary income consists of your ''last'' dollars, when you ponder investing tax-free vs. taxable bonds, for example, it's the higher marginal tax rate that is relevant.

A recent issue of Consumer Reports magazine observed: ''In setting up tax brackets, the government divides taxpayers' income into segments and imposes a gradually increasing tax as income rises.

''In effect, your income is taxed in layers - the first few thousand dollars of taxable income at low rates, the last few thousand at higher rates.''

To find your own marginal tax rate, the magazine advises, take your taxable income as reported on your 1983 tax return: Line 37 of Form 1040, Line 19 of Form 1040A, or Line 7 of Form 1040EZ. Then consult the tax-rate schedule provided by the Internal Revenue Service with your 1983 forms.

''For example,'' the magazine says, ''if you're a single taxpayer with a taxable income of $35,000, the schedule shows that you fall into the $34,100-to- amount over $34,100, your tax bracket would be 40 percent.''

Note that, if your taxable income is under $50,000, this tax-rate schedule is not the place to find your tax when you fill out your forms; instead you find it in the tax tables.