The U.S. has a progressive income tax system that can often be confusing. Different amounts of your income are taxed at different rates, so you’ll likely pay a lower percentage of your income in taxes than the tax bracket you fall into. Here’s how it works.

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Breaking down the tax brackets

Each bracket of your income is taxed at a different rate. As you make more money, a higher percentage may be owed in taxes.

Taxable income, single filer

Tax rate

10% Not over \$9,875

12% \$9,875.01 to \$40,125

22% \$40,125.01 to \$85,525

24% \$85,525.01 to \$163,300

32% \$163,300.01 to \$207,350

35% \$207,350.01 to \$518,400

37% Over \$518,400

Taxable income, married and filing jointly

Tax rate

10% Not over \$19,750

12% \$19,750.01 to \$80,250

22% \$80,250.01 to \$171,050

24% \$171,050.01 to \$326,600

32% \$326,600.01 to \$414,700

35% \$414,700.01 to \$622,050

37% Over \$622,050

Source: https://www.irs.gov/pub/irs-drop/rp-19-44.pdf, 2019

So what does this mean?

Joe is single and has \$50,000 in taxable income
. Let’s calculate his taxes.

From \$0 to \$9,875, Joe is taxed at 10%.

\$9,875 x 10% = \$987.50

From \$9,875.01 to \$40,125, Joe is taxed at 12%.

\$30,249.99 x 12% = \$3,630

From \$40,125.01 to \$50,000, Joe is taxed at 22%.

\$9,874.99 x 22% = \$2,172.50

TOTAL TAX = \$6,790

Joe’s marginal tax rate—the rate he pays on his top bracket—is 22%. But in reality, Joe’s tax liability—his effective tax rate—is about 14% of his taxable income.

Lisa is single and has \$100,000 in taxable income.

From \$0 to \$9,875, Lisa is taxed at 10%.

\$9,875 x 10% = \$987.50

From \$9,875.01 to \$40,125, Lisa is taxed at 12%.

\$30,249.99 x 12% = \$3,630

From \$40,125.01 to \$85,525, Lisa is taxed at 22%.

\$45,399.99 x 22% = \$9,988

From \$84,525.01 to \$100,000, Lisa is taxed at 24%.

\$14,474.99 x 24% = \$3,474

TOTAL TAX = \$18,079.50

Lisa’s marginal tax rate is 24%. But in reality, Lisa’s tax liability gives her an effective tax rate of about 18%.

Say Lisa and Joe fall in love and get married. They decide to file a joint tax return, with a combined taxable income of \$150,000.

The first \$19,750 they make is taxed at 10%.

\$19,750 x 10% = \$1,975

From \$19,750.01 to \$80,250, they are taxed at 12%.

\$60,499.99 x 12% = \$7,260

From \$80,251.01 to \$150,000, they are taxed at 22%.

\$69,748.99 x 22% = \$15,345

TOTAL TAX = \$24,580

If they had stayed single, Joe and Lisa would have paid a combined \$24,869.50. Filing jointly saves them \$289.50, sometimes referred to as a “marriage benefit.”

If Joe and Lisa’s tax liability had been higher as a married couple filing jointly, the extra funds owed would be referred to as a “marriage penalty.”

But that’s not all ...

Different credits and deductions based on life events could affect Joe and Lisa’s tax liability.

If they start a family, they may qualify for new deductions and child care credits, and their tax liability would likely shrink.

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