A tax bracket is a range of income taxed at a single given rate. Your appropriate filing status, such as for filing Single, Married filing Jointly, or filing as Head of Household, must be determined. The taxable income bracket amounts are different for each class of filer. Then use the correct brackets to figure your income tax liability. An example of a tax bracket would be: $0 - $9,950, for single filers in the table below. That portion of taxable income, for someone of single filer status, would be taxed at the rate of 10%.
But there are a couple of aspects of this calculation that aren't completely straightforward. For one thing, as mentioned, the actual amounts listed as taxable income within each bracket vary according to your filing classification. For another, your taxes aren't calculated on your gross income, but on your taxable income after deductions and other possible adjustments.
First off, you must subtract all applicable deductions or adjustments from your gross income to reach the taxable amount. Many people utilize the standard deduction for their filing status. So, the tax will be figured after you subtract these deductions and other legitimate adjustments. Of course, you can choose to itemize your deductions, if that is advantageous. The mortgage interest deduction, for example, can only be taken by taxpayers who itemize.
In either case, taxable income would be the amount remaining after all these deductions are subtracted from your gross income. These calculations apply only to ordinary income. Long-term capital gains and qualified dividends are not ordinary income and are usually taxed at lower, preferential rates.
But these aren't the only slightly tricky things about using the tax tables. If you look at your particular filing status in the table below, you will note that different portions of your total taxable income are taxed at different rates.
For example, if your taxable income is $75,000 and you are a single filer, you begin by taxing income at 10% for the first $9,950 of taxable income, then go to 12% for the next $9,951 to $40,525 of taxable income, and, finally, to 22% for the tax amount in the bracket that runs from $40,526 to $75,000.
So, you are taxed at the rate listed for each bracket only on the amount of your taxable income that falls within that range. Then you repeat that process, and tax at the next appropriate rate, until all taxable income has been taxed. These amounts are then added together to give the total tax liability owed.
Find your correct filing status in the table below. The tax bracket percentages are the same for every filing situation. But the actual amount of taxable income included in each particular bracket, and the tax owed, of course, are usually different for each classification of the filer.
The table lists the most common types of filing situations and gives the tax rates for each in the appropriate tax brackets. This is why it's important to incorporate tax planning into your annual strategy.
|
Rate |
Single Individuals, Taxable Income Over |
Married Filing Jointly, Taxable Income Over |
Married Filing Separately, Taxable Income Over |
Heads of Household, Taxable Income Over |
|
10% |
$0 to $11,600 |
$0 to $23,200 |
$0 to $11,600 |
$0 to $16,550 |
|
12% |
$11,600 to $47,150 |
$23,200 to $94,300 |
$11,600 to $47,150 |
$16,550 to $63,100 |
|
22% |
$47,150 to $100,525 |
$94,300 to $201,050 |
$47,150 to $100,525 |
$63,100 to $100,500 |
|
24% |
$100,525 to $191,950 |
$201,050 to $383,900 |
$100,525 to $191,950 |
$100,500 to $191,950 |
|
32% |
$191,950 to $243,725 |
$383,900 to $487,450 |
$191,950 to $243,725 |
$191,950 to $243,700 |
|
35% |
$243,725 to $609,350 |
$487,450 to $731,200 |
$243,725 to $365,600 |
$243,700 to $609,350 |
|
37% |
$609,350 or more |
$731,200 or more |
$365,600 or more |
$609,350 or more |
Source: Internal Revenue Service (IRS)
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