A:

Tax brackets refer to the table created when matching filing statuses with their corresponding tax rates. There are three components of a tax bracket: filing status, tax rate, and income range. Tax rates are shown on the Y-axis and filing statuses are shown on the X-axis. The amount of income taxed at a specific rate for a specific income amount is found in the body of the tax bracket. Each of the seven tax rates apply to a specific level of income rather than applying to all of a taxpayer’s taxable income. Taxpayers use a tax bracket to determine what their tax rates are.

The Internal Revenue Service (IRS) uses a progressive tax system, meaning that the more a taxpayer earns the more tax will be owed. Taxpayers pick which filing status is most appropriate to their situation, and calculate how much income is taxable after accounting for deductions and exemptions. There are five filing statuses: single, married filing separately, married filing jointly, head of household, and qualifying widow/widower with dependent child. There are also six marginal income tax brackets, each assigned a different tax rate.

2014 Tax Brackets

Tax rate Single filers Married filing jointly or qualifying widow/widower Married filing separately Head of household
10% Up to $9,075 Up to $18,150 Up to $9,075 Up to $12,950
15% $9,076 to $36,900 $18,151 to $73,800 $9,076 to $36,900 $12,951 to $49,400
25% $36,901 to $89,350 $73,801 to $148,850 $36,901 to $74,425 $49,401 to $127,550
28% $89,351 to $186,350 $148,851 to $226,850 $74,426 to $113,425 $127,551 to $206,600
33% $186,351 to $405,100 $226,851 to $405,100 $113,426 to $202,550 $206,601 to $405,100
35% $405,101 to $406,750 $405,101 to $457,600 $202,551 to $228,800 $405,101 to $432,200
39.6% $406,751 or more $457,601 or more $228,801 or more $432,201 or more

For example, a taxpayer who earns $50,000 and files as single does not pay a tax rate of 25% on all taxable income, but only income between $36,901 and $50,000. He or she will pay a tax rate of 10% on the first $9,076 of income, and 15% on income between $9,076 and $36,901.

RELATED FAQS
  1. How can I find out which income tax bracket I am in?

    Find out how to determine your federal income tax bracket and calculate how much you will owe in federal taxes with online ... Read Answer >>
  2. Are tax brackets adjusted for inflation?

    Learn about U.S. tax brackets and how the U.S. Internal Revenue Service (IRS) makes annual inflation-based adjustments for ... Read Answer >>
  3. Can moving to a higher tax bracket cause me to have a lower net income?

    Many people think that when their income increases by enough to push them into a higher tax bracket, their overall take-home ... Read Answer >>
  4. What is the highest marginal tax rate in the United States?

    Find the highest marginal tax rate in the United States, calculate your taxable income, and maximize your returns by moving ... Read Answer >>
  5. How do I calculate my effective tax rate using Excel?

    Find out how to calculate your effective tax rate using Microsoft Excel, what income tax rates to apply to your earned income ... Read Answer >>
  6. How does the marginal tax rate system work?

    The marginal tax rate is the rate of tax that income earners incur on each additional dollar of income. As the marginal tax ... Read Answer >>
Related Articles
  1. Taxes

    Income Tax Brackets for 2015-2016

    Learn about the 2015-2016 tax brackets, how to calculate your marginal tax rate, the five types of filing status and how to qualify for them.
  2. Taxes

    Why Your Tax Bracket Is Not the Tax Rate You Pay

    Understanding how federal and state tax brackets work is important for tax planning – and for making sense of the political conversation around tax reform.
  3. Taxes

    Personal Income Tax Guide: Basic Concepts

    By Ken ClarkOne of the most important but misunderstood concepts in tax planning is the mechanics of the United States' progressive tax system. When asked how this system functions, most people ...
  4. Personal Finance

    What's a Marginal Tax Rate?

    The marginal tax rate is based on a progressive tax system, where tax rates for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon ...
  5. Taxes

    How Are Capital Gains And Dividends Taxed Differently?

    Individuals in the 25% or higher tax bracket pay a 20% tax on long-term capital gains.
  6. Your Practice

    Tax Time is Coming; Don't Be Caught Off Guard

    It's time to think about tax returns again. The good news is that the regulations in 2016 have not changed dramatically from last year.
  7. Taxes

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  8. Taxes

    Next Season, File Taxes On Your Own

    Master these fundamentals and you'll be doing your own taxes with minimal stress.
  9. Taxes

    Comparing Long-Term vs. Short-Term Capital Gain Tax Rates

    Learn about the difference between short- and long-term capital gains and how the duration of your investment can impact your tax liability.
  10. Taxes

    Gay Marriage and Taxes: Everything You Should Know

    Same-sex couples now have a variety of tax strategies to consider.
RELATED TERMS
  1. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
  2. Flat Tax

    A system that applies the same tax rate to every taxpayer regardless ...
  3. Tax Rate

    The percentage at which an individual or corporation is taxed. ...
  4. Federal Tax Brackets

    Income tax groupings specified by the Internal Revenue Service ...
  5. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. ...
  6. Progressive Tax

    A tax that takes a larger percentage from the income of high-income ...

You May Also Like

Trading Center