See The IRS Federal Tax Brackets for 2017, 2018

As the 2017 tax season approaches, most people will scramble to get all their information and documents together to timely file their federal income tax return. Although you may be expecting a refund on your tax return, depending on which bracket your income is taxed, you may be surprised by a hefty tax bill.

IRS tax filing brackets

It’s important to understand how the United States tax bracket system works and to see what current rate you are taxed at to accurately calculate your tax refund or liability for the tax year. It will be interesting to see how these tax brackets will change in the future with the proposed Trump tax reform plan.

2017 Federal Tax Brackets Chart

On October of 2016, the IRS released updates to the income tax brackets and other limitations which can be found in the tables below:

Tax Rate Single: Taxable Income Bracket Tax Liability
10% $0 to $9,325 10% of Taxable Income
15% $9,326 to $37,950 $932.50 plus 15% of the excess over $9,325
25% $37,951 to $91,900 $5,226.25 plus 25% of the excess over $37,950
28% $91,901 to $191,650 $18,713.75 plus 28% of the excess over $91,900
33% $191,651 to $416,700 $46,643.75 plus 33% of the excess over $191,650
35% $416,701 to $418,400 $120,910.25 plus 35% of the excess over $416,700
39.60% $418,401 and above $121,505.25 plus 39.6% of the excess over $418,400

 

Tax Rate Married Filing Jointly: Taxable Income Bracket Tax Liability
10% $0 to $18,650 10% of Taxable Income
15% $18,651 to $75,900 $1,865 plus 15% of the excess over $18,650
25% $75,901 to $153,100 $10,452.50 plus 25% of the excess over $75,900
28% $153,101 to $233,350 $29,752.50 plus 28% of the excess over $153,100
33% $233,351 to $416,700 $52,222.50 plus 33% of the excess over $233,350
35% $416,701 to $470,700 $112,728 plus 35% of the excess over $416,700
39.60% $470,701 and above $131,628 plus 39.6% of the excess over $470,700

 

Tax Rate Head of Household: Taxable Income Bracket Tax Liability
10% $0 to $13,350 10% of Taxable Income
15% $13,351 to $50,800 $1,335 plus 15% of the excess over $13,350
25% $50,801 to $131,200 $6,952.50 plus 25% of the excess over $50,800
28% $131,201 to $212,500 $27,052.50 plus 28% of the excess over $131,200
33% $212,501 to $416,700 $49,816.50 plus 33% of the excess over $212,500
35% $416,701 to $444,500 $117,202.50 plus 35% of the excess over $416,700
39.60% $444,501 and above $126,950 plus 39.6% of the excess over $444,550


2018 Federal Tax Brackets Chart

Source: https://www.irs.gov/pub/irs-drop/rp-17-58.pdf

Tax Rate Single: Taxable Income Bracket Tax Liability
10% $0 to $9,525 10% of Taxable Income
15% $9,526 to $38,700 $952.50 plus 15% of the excess over $9,525
25% $38,701 to $93,700 $5,328.25 plus 25% of the excess over $38,700
28% $93,701 to $195,450 $19,078.75 plus 28% of the excess over $93,700
33% $195,451 to $424,950 $47,568.75 plus 33% of the excess over $195,450
35% $424,951 to $426,700 $123,303.75 plus 35% of the excess over $424,950
39.60% $426,701 and above $123,916.25 plus 39.6% of the excess over $426,700

 

Tax Rate Married Filing Jointly: Taxable Income Bracket Tax Liability
10% $0 to $19,050 10% of Taxable Income
15% $19,051 to $77,400 $1,905 plus 15% of the excess over $189,050
25% $77,401 to $156,150 $10,657.50 plus 25% of the excess over $77,400
28% $156,151 to $237,950 $30,345 plus 28% of the excess over $156,150
33% $237,951 to $424,950 $53,249 plus 33% of the excess over $237,950
35% $424,951 to $480,050 $114,959 plus 35% of the excess over $424,950
39.60% $480,051 and above $134,244 plus 39.6% of the excess over $480,050

 

Tax Rate Head of Household: Taxable Income Bracket Tax Liability
10% $0 to $13,600 10% of Taxable Income
15% $13,601 to $51,850 $1,360 plus 15% of the excess over $13,600
25% $51,851 to $133,850 $7,097.50 plus 25% of the excess over $51,850
28% $133,851 to $216,700 $27,597.50 plus 28% of the excess over $133,850
33% $216,701 to $424,950 $50,795.50 plus 33% of the excess over $216,700
35% $424,951 to $453,350 $119,518.50 plus 35% of the excess over $424,950
39.60% $453,351 and above $129,458 plus 39.6% of the excess over $453,350

How to Calculate Your Tax Liability Using the Tax Brackets.

The United States Internal Revenue Service uses a tax bracket system. The tax rate increases as the level of taxable income increases. The 2017 tax rate ranges from 10% to 39.60%. See the 2017 and 2018 tax bracket table above.

Being in a “higher tax bracket” doesn’t mean all of your income is taxed at that rate. The tax bracket rate is a marginal tax – each level of income is taxes at its own bracket rate – as opposed to the whole income being taxed at the highest tax rate, which is a common misconception. Although your income may fall in a higher tax bracket, your effective tax rate is much lower.

Example:

For example, let’s say you earned $100,000 of taxable income as a single individual. Your tax liability for 2017 would work as follows using the tax bracket table above.

Since $100,000 falls between 91,901 and 191,650, you would take: $18,713.75 + (*$8,100 X 28%). The tax liability would be $20,981.75

*$8,100 = $100,000 – $91,900. The excess of 91,900 is taxed at 28% per the tax bracket.

What is Taxable Income?

Taxable income is the amount of income you report to the IRS after taking all tax deductions, exemptions and standard deductions on the tax return. The gross income minus all deductions and exemptions is the amount that is used to calculate how much tax liability you owe for the tax year.

Knowing how much income and deductions you can claim during the year can help estimate your tax refund or liability. Certain tax planning strategies such as investments in IRA or 401(k) can be used to minimized the tax burden.

Summary

As we wait and see what types of tax reform actually gets passed, the current IRS Federal income tax brackets above are what should be used. In general, the more income you have, the higher your tax liability, but the tax bracket is used to calculate each level of income at the same rates.

 

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