How Do Taxes Work?
How Are Taxes Calculated?
The amount of tax you owe depends on a few different factors:
-Your filing status: Are you single? Married? Head of household? This will determine which tax bracket you fall into.
-Your taxable income: This is your total income minus any deductions or credits that you qualify for.
-Your marginal tax rate: This is the percentage oftax that you’ll owe on each additional dollarof taxable income. For example, if your marginaltax rate is 25%, that means you’ll owe $0federal income tax on the first $9275you earn (this is the bottom bracket forsingles in 2017), but 25% on every additionaldollar beyond that ($9276-$37650).
A tax bracket is the range of incomes that are taxed at a certain rate. The United States has a progressive tax system, which means that as your income increases, so does your marginal tax rate. In other words, the more you make, the more you owe in taxes.
There are seven tax brackets in the United States, and your tax rate depends on which bracket you fall into. The brackets are as follows:
10%: This is the lowest tax bracket, and it applies to incomes up to $9,875 for single filers and $19,750 for married couples filing jointly.
12%: This bracket applies to incomes between $9,876 and $40,125 for single filers and $19,751 and $80,250 for married couples filing jointly.
22%: This bracket applies to incomes between $40,126 and $85,525 for single filers and $80,251 and $171,050 for married couples filing jointly.
24%: This bracket applies to incomes between $85,526 and $163,300 for single filers and $171,051 and $326,600 for married couples filing jointly.
32%: This bracket applies to incomes between $163,301 and $207,350 for single filers and $326,601 and $414700 for married couples filing jointly.
35%: This bracket applies to incomes between $207351 and 518400 for single filers and $414701 and 622050 for married couples filing jointly
37%: This bracketappliestoincomesbetween$518401and$Infinityforsinglefilersand$622051and$Infinityformarriedcouplesfilingjointly