How To Find Your Income Tax Bracket
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Key Takeaways
- Your tax liability is determined by your income, and your income is broken down into different tax brackets.
- Knowing your tax bracket helps you plan your deductions and credits, and boosting your personal finances.
- Calculating your tax brackets gives you a framework for planning big life events (such as marriage or buying a house).
- It also allows you to hit your long-term goals without blowing up your tax liability.
- For 2025, the federal tax rates will be 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Finding Your Income Tax Bracket, Rate, and Filing Status
“What tax bracket am I in?” is probably a question that pops into your head at least once per tax season. Chances are that most people reading this article have a working yet still vague idea of what tax brackets are, without fully grasping their full complexity. Yes, unraveling the inner workings of a progressive tax system doesn’t sound like fun for 99% of people, but it certainly pays to do so.
You see, in order to properly file your federal income tax return and pay any tax that you owe, it is necessary to understand your income tax bracket, your filing status, and which income tax rate(s) apply to you. By doing so, you will be able to make smarter decisions and boost your finances, not just for the current tax season, but for all future tax seasons.
There are currently 7 marginal income tax brackets, each with it’s own tax rate. There are also 5 federal filing statuses. Your income tax bracket and the amount of tax you owe will depend on your filing status and how much taxable income you earn during the year.
This article discusses marginal income tax brackets, federal filing statuses, and income tax rates. We’ll tell you how to find your highest income tax bracket, how to keep your taxable income from crossing over too much into the highest brackets, and general tips to not only keep your taxes low, but smart as well. This information will help you develop a tax strategy and prepare for the upcoming filing season.
Understanding Your Income Tax Bracket
Tax brackets originate from a very simple principle: Your income tax is determined by how much money you make, and that money is broken down by the IRS into different tax brackets.
Marginal Income Tax Brackets
Your marginal income tax bracket basically represents the highest tax rate that you must pay on your income. There are currently 7 income tax brackets/rates for each federal filing status: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
The marginal tax bracket system is a gradual tax schedule – in other words, the more you earn, the more tax you pay. The amount of taxable income that you earn each year determines which tax bracket(s) you fall into. It is important to realize that only the money you earn within a certain bracket is taxed at that rate. This means that if you earned more in 2020 than you did in 2019 and thus moved into a higher tax bracket, only the money that falls within that higher tax bracket is taxed at the higher rate.
For example, if you move from the 22% tax bracket up to the 24% tax bracket, you may make the mistake of believing that all of your income is now taxed at 24%. However, only the money that you earn within the 24% bracket is taxed at that rate – the rest of your income is taxed at the lower rates for each bracket that applies to you.
The structure of federal income tax brackets was first implemented by the IRS in the early 1900s in an attempt to create a progressive tax system that would demand less from lower-income individuals. This system, plus a series of tax credits and tax deductions, have put a much larger tax burden on higher-earning workers and allowed nearly half of Americans to avoid owing federal income tax altogether.
IRS Filing Statuses
Your filing status determines your filing requirements (whether or not you are required to file a tax return), your standard deduction amount, your eligibility for certain tax breaks, and your income tax rate.
There are currently 5 federal filing statuses based on marital status and other conditions. They are: Single, Married filing separately, Married filing jointly, Head of household, and Qualifying widow/widower with dependent child.
When you fill out your federal income tax return, you must specify what your filing status is on the tax form. Review each filing status carefully and choose the one that best fits your situation. If you qualify for more than one filing status, you are allowed to choose the one that offers you the lowest tax liability.
Federal Income Tax Brackets, Rates, and Filing Statuses: FAQ
1. What are the federal income tax rates for the 2025 tax year?
For 2025, the federal tax rates (which remain the same as 2024) will be 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The income ranges to which each bracket applies to will vary depending on your filing status.
3. How does my filing status affect my taxes?
Your filing status is what determines the income ranges of each tax bracket along with the standard deduction that’s applicable to you. The filing statuses are:
- Single: For taxpayers who are not married nor do they qualify for another status.
- Married filing jointly: Married couples filing a combined tax return.
- Married filing separately: For married taxpayers filing an individual tax return, separate from their spouse.
- Head of household: For single taxpayers who have claimed dependents.
- Qualifying widow(er): For surviving spouses who have claimed dependents.
4. How do tax brackets work if I earn income in multiple brackets?
That’s perfectly normal. In fact, that’s what’s supposed to happen! In a progressive tax system, your income “fills” each bracket as it goes higher. For example, imagine you have a taxable income of $100,000 with a single filing status. Using the brackets for 2024, the first $11,000 would be taxed at 10%. Then, the amount between $11,001 and $44,725 is taxed at 12%. Finally, the amount between $44,726 and $100,000 (thus, the rest of your taxable income) will be taxed at 22%.
5. Are tax brackets adjusted for inflation? How often?
Yes, the federal government adjusts all federal tax brackets annually to account for inflation in order to prevent what’s known as “bracket creep”; that is when taxpayers get pushed into higher and higher tax brackets each time due to increases in nominal income but not purchasing power.
6. Is there an easy way to calculate my tax liability?
Determining your actual tax liability requires many different calculations that can get a little complex. However, you can make a pretty good estimate by following these steps:
- Determine your taxable income (remember, that’s your total income minus deductions).
- Check the tax brackets for the year and apply them to the relevant portions of your income.
- Subtract all applicable tax credits directly from your estimated tax liability. You can use the official IRS Tax Calculator for this step.
RELATED: Common Tax Questions & Answers
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