What are tax brackets and how to calculate yours
Learn how your tax bracket helps determine how much you’re paying the IRS
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The United States has a progressive income tax system in which tax rates increase as income increases. It can be confusing, but knowing the bracket your income falls into can be a big help in many financial decisions.
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How federal tax brackets work
To achieve a progressive tax system, Congress divided income into seven levels—or brackets—and assigned increasing tax rates to each subsequent bracket. The IRS adjusts the income levels applicable for each bracket each year for inflation. Here are the 2023 brackets for single filers.
| Tax rate | Taxable income |
|---|---|
| 10% | Up to $11,000 |
| 12% | Over $11,000 to $44,725 |
| 22% | Over $44,725 to $95,375 |
| 24% | Over $95,375 to $182,100 |
| 32% | Over $182,100 to $231,250 |
| 35% | Over $231,250 to $578,125 |
| 37% | Over $578,125 |
Source: IRS.gov
Quick tip
Don’t panic if it looks as though your income puts you in a higher bracket than you expected. The brackets are based on your taxable income, which is lower than your gross income because adjustments and deductions are subtracted.
How to find your marginal rate and effective tax rate
Your marginal tax rate is the rate applied to your last dollar of income. You can learn it by looking at the IRS tables. Let’s say you’re single and have taxable income of $75,000 a year. As you can see from the table above, that puts your marginal rate at 22%.
It’s important to remember that the marginal rate is applied only to income that falls in that bracket. Income falling in the lower brackets is taxed at the lower rates. This means the actual tax rate that you pay on your taxable income—called your effective tax rate—is lower than the marginal rate. In this case, it’s 15.7%.
For a single filer who has $75,000 in taxable income
Marginal rate:
22%
Effective rate:
15.7%
How to calculate your effective tax rate
Determining your effective rate takes some math. Here are the steps for a single filer who has $75,000 in taxable income:
Determine how much of your income falls in each tax bracket and multiply the amount by that bracket’s rate.
Sample taxable income = $75,000
The first $11,000 is taxed in the 10% tax bracket
$11,000
10%
$1,100
The next $33,725 is taxed in the 12% tax bracket
$33,725
12%
$4,047
The remaining $30,725 is taxed in the 22% tax bracket
$30,275
22%
$6,661
Add those results to get the total tax
$1,100
$4,047
$6,611
$11,808
Divide the total tax by the taxable income
$11,808
Total tax
$75,000
Taxable income
15.7%
Effective tax rate
How filing status affects tax brackets
There are different sets of brackets for each filing status. Single is the most common, followed by married filing jointly. The IRS has detailed breakdowns for each filing status. Here’s a summary of the brackets for the other filing statuses.
| | |
|---|---|
| | Taxable income per bracket is double that for single filers until the 37% rate, which kicks in for taxable income over $693,750. |
| | Taxable income per bracket falls between single and married filing jointly until the 24% rate and then is roughly the same as for single filers. |
| | Taxable income per bracket is the same as for single filers until the 37% rate, which kicks in for taxable income over $346,875. |
Why it's important to know your tax bracket
Knowing your tax bracket, marginal tax rate and effective tax rate can equip you with valuable information for financial planning and budgeting. The effective rate is important in determining how much to withhold from your paycheck or to pay in estimated taxes. The marginal tax rate helps you plan for the tax impact of year-over-year changes in income.
Knowing where you fall in your top tax bracket can affect how you handle actions that affect your taxable income, such as charitable donations and contributions to or withdrawals from retirement plans. For example, a big charitable donation could reduce your income enough to move you into a lower bracket. On the other hand, a withdrawal from a retirement plan could push you into a higher bracket. Consult a tax professional for detailed guidance.
