What Is My Federal Income Tax Bracket?
Learn how the U.S. progressive tax system functions. This guide clarifies how different portions of your income are taxed at varying rates to determine your tax.
The United States federal government utilizes a progressive tax system to determine income tax liability. This means that as an individual’s income increases, it is taxed at progressively higher rates. These rates are organized into segments known as tax brackets, which are ranges of income subject to a specific tax rate. Understanding which bracket your income falls into depends on several factors beyond just your annual salary.
Determining Your Filing Status
Before you can determine your tax bracket, you must identify your filing status, as this dictates the specific income ranges and tax rates that will apply to you. The Internal Revenue Service (IRS) recognizes five filing statuses. The Single status is for unmarried individuals, while Married Filing Jointly is for married couples who choose to combine their incomes on one tax return. Conversely, Married Filing Separately is an option for married couples who wish to report their incomes and deductions on separate returns.
The Head of Household status is for unmarried individuals who pay for more than half of the household expenses and have a qualifying child or dependent living with them for more than half the year. This status provides a more favorable standard deduction and tax rates compared to the Single status. Qualifying Widow(er) can be used for two years following the death of a spouse, provided the surviving spouse has a dependent child and has not remarried.
Calculating Your Taxable Income
Your tax bracket is not based on your gross salary but on your taxable income. The process begins with your gross income, which includes all income from all sources. From this amount, you subtract certain “above-the-line” deductions, such as contributions to a traditional IRA or student loan interest paid, to arrive at your Adjusted Gross Income (AGI).
From your AGI, you then subtract either the standard deduction or your itemized deductions. For the 2024 tax year, the standard deduction for Single filers is $14,600, for those Married Filing Jointly, it is $29,200, and Head of Household filers can claim a $21,900 standard deduction. You would choose to itemize deductions if your total deductible expenses, such as mortgage interest, state and local taxes, and charitable contributions, exceed your available standard deduction. The final number after subtracting these deductions is your taxable income.
2024 Federal Income Tax Brackets
With your filing status and taxable income, you can locate your tax bracket in the official IRS tables for the 2024 tax year. These tables are divided by filing status, each with seven tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
For a Single filer in 2024, the 22% bracket applies to taxable income over $47,150 up to $100,525. For those who are Married Filing Jointly, that same 22% bracket covers income over $94,300 up to $201,050. A Head of Household filer would be in the 22% bracket if their taxable income is over $63,100 up to $100,500. These income ranges are adjusted annually by the IRS to account for inflation.
Understanding Your Tax Rate
A common misunderstanding is that if you fall into a certain tax bracket, all of your income is taxed at that single rate. The progressive system taxes your income in portions. For instance, a single filer with $60,000 in taxable income for 2024 is in the 22% bracket, but they do not pay 22% on the entire $60,000. Instead, the first $11,600 of their income is taxed at 10%, the portion from $11,601 to $47,150 is taxed at 12%, and only the income from $47,151 to $60,000 is taxed at the 22% rate.
This structure gives rise to two different ways of looking at your tax rate: the marginal tax rate and the effective tax rate. Your marginal tax rate is the rate applied to your last dollar of earnings, which in the previous example is 22%. This is the rate most people refer to when they say what “bracket” they are in. Your effective tax rate, on the other hand, is calculated by dividing your total tax liability by your total taxable income. This rate provides an average of the tax you pay across all of your income.