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 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 >>
  2. What is the income breakdown for the effective tax rate?

    Read about the effective tax rate, how the marginal income tax brackets affect it and how the denominator in its formula ... Read Answer >>
  3. Do tax brackets include Social Security?

    Find out whether your Social Security benefits are subject to taxation, and learn how they can affect your tax bracket as ... Read Answer >>
  4. What is the difference between a state income tax and a federal income tax?

    Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
Related Articles
  1. Taxes

    Breaking Down Taxes For Different Income Brackets

    Here is a useful rundown of how much you will pay in taxes based on your income.
  2. Taxes

    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 ...
  3. Taxes

    New Tax Rules Target The Top Tax Bracket

    The American Taxpayer Relief Act brings about new tax rules for the wealthy that people such as Warren Buffett have been calling for over the last few years.
  4. Taxes

    Anticipating Trump: How to Adjust Tax Planning Now

    President-elect Trump's proposed tax plan means your tax situation could change next year. What to do now.
  5. Taxes

    Capital Gains Tax Cuts For Middle Income Investors

    Find out how TIPRA plans to slash taxes for those in the 10-15% tax bracket.
  6. Taxes

    20 Tax Changes You Need To Know About

    Don't miss out on the tax changes. Here's a list that you need to know about.
  7. Financial Advisor

    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.
  8. Managing Wealth

    How Trump Tax Plans Will Aid Wealth Building for the 1%

    President-elect Trump's proposed tax plan includes tax breaks that may offer some generous benefits to higher-income earners.
  9. Taxes

    Next Season, File Taxes On Your Own

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

    Ryan vs. Trump: How Their Tax Plans Differ

    Changes to the tax code are likely, but President-elect Trump and House Speaker Paul Ryan (D-Wis.) have yet to agree on which ones.
RELATED TERMS
  1. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
  2. IRS Publication 501

    A document published by the Internal Revenue Service that covers ...
  3. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  4. American Taxpayer Relief Act Of 2012

    A U.S. bill signed by President Obama on January 2, 2013, that ...
  5. Tax Base

    The assessed value of a set of assets, investments or income ...
  6. Married Filing Jointly

    A filing status for married couples that have wed before the ...
Hot Definitions
  1. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  2. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the ...
  4. Border Adjustment Tax

    A tax levied on goods based on where they are sold – exported goods are exempt from tax; those imported and sold in the ...
  5. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  6. Blind Trust

    A trust in which the trustees have full discretion over the assets, and the trust beneficiaries have no knowledge of the ...
Trading Center