Do you know how your tax rate is really calculated?
If your tax filing status is 'single' and
your taxable income is $40,000,
you fall into the 25% tax bracket.
That means you pay 25% tax, right?
Wrong.
Not all of your income is taxed at 25%.
Use this tool to learn how your tax rate is really calculated
and how much you pay in Federal Income Tax.
Enter your details below
Your tax filing status
Your taxable income ($)
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Tax Brackets define the rates at which federal income tax is applied to different portions of your income. The relevant tax brackets are based on the qualifying person's filing status and the amount of taxable income. With every new tax year, the IRS will attempt to increase the minimum and maximum dollar amounts for each rate to account for the increase in cost of living and other economic factors.
Taxable Income is all the income you earn from all sources minus all the deductions you’re entitled to based on your personal circumstances
Marginal tax rate is defined by Tax Brackets, where – based on your filing status and the amount of taxable income – you ‘fall into’ a bracket with a given %.
Effective tax rate is the total amount of tax you pay divided by your total taxable income. Because of the way tax brackets operate, this is not the same as your marginal tax rate (i.e. the tax bracket you ‘fall into).
Filing Status
There are five filing statuses:
If more than one filing status applies to you, choose the one that will give you the lowest tax.
Married Filing Jointly
You can choose married filing jointly as your filing status if you are considered married and both you and your spouse agree to file a joint return. On a joint return, you and your spouse report your combined income and deduct your combined allowable expenses. You can file a joint return even if one of you had no income or deductions.
Married Filing Separately
You can choose married filing separately as your filing status if you are married. This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return. If you and your spouse do not agree to file a joint return, you have to use this filing status unless you qualify for head of household status.
Head of Household
You may be able to file as head of household if you meet all the following requirements.
1. You are unmarried or considered unmarried on the last day of the year.
2. You paid more than half the cost of keeping up a home for the year.
3. A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the qualifying person is your dependent parent, he or she does not have to live with you.
Qualifying widower with Dependent Child
If your spouse died in 2012, you can use married filing jointly as your filing status for 2012 if you otherwise qualify to use that status. The year of death is the last year for which you can file jointly with your deceased spouse.
Single
Your filing status is single if you are considered unmarried and you do not qualify for another filing status.
Sources
US Code Title 26, Subtitle A, Chapter1B, Part 1 (§61)
US Code Title 26, Subtitle A, Chapter1B, Part 1 (§63)