| 2023 Marginal Tax Rates by Income and Tax Filing Status | ||||
|---|---|---|---|---|
| Tax Rate | For Single Filers | For Married Couples Filing Jointly | For Married Couples Filing Separately | For Head of Household Filers |
| 10% | $11,000 or less | $22000 or less | $11,000 or less | $15,700 or less |
| 12% | $11,001 to $44,725 | $22,001 to $89,450 | $11,001 to $44,725 | $15,701 to $59,850 |
| 22% | $44,726 to $95,375 | $89,451 to $190,750 | $44,726 to $95,375 | $59,851 to $95,350 |
| 24% | $95,376 to $182,100 | $190,751 to $364,200 | $95,376 to $182,100 | $95,351 to $182,100 |
| 32% | $182,101 to $231,250 | $364,201 to $462,500 | $182,101 to $231,250 | $182,101 to $231,250 |
| 35% | $231,251 to $578,125 | $462,501 to $693,750 | $231,251 to $346,875 | $231,251 to $578,100 |
| 37% | Over $578,125 | Over $693,750 | Over $346,875 | Over $578,100 |
Source: IRS
How Income Tax Brackets Work
Most taxpayers—all except those who fall squarely into only the minimum bracket—have income that is taxed progressively. This means that their income is subject to multiple rates beyond the nominal rate of their tax bracket. The dollar ranges in each bracket also varyaccording to filing status (single, married filing jointly and qualifying widow[er]s, married filing separately, and head of household).
An annual income of $100,000 fits the 22% tax bracket for all filing statuses in tax year 2024. However, the entire $100,000 isn't taxed at 22%. It's taxed at the different rates aligned with the various brackets of income that cover the segments of income up to $100,000. So, ultimately a taxpayer pays less than they would if their total income were taxed at 22%.
That also means a taxpayer’s tax bracket doesn't necessarily reflect the percentage of their income that they will pay in taxes—what's known as the effective tax rate.
There are numerous online sources to find your specific federal income tax bracket, including the IRS's annual tax tables, which provide highly detailed tax filing statuses in increments of $50 of taxable income up to $100,000.
Other websites provide tax bracket calculators that do the math for you, as long as you know your filing status and taxable income. Your tax bracket can shift from year to year, depending on inflation adjustments and changes in your income and filing status, so it’s worth checking annually.
Tax brackets are adjusted each year for inflation, using the Consumer Price Index (CPI).
Example: How to Calculate Your Taxes
Here's the tax responsibility and the effective tax rate for a single filer with a taxable income of $50,000 in 2023:
Add the taxes owed in each of the brackets:
The individual’s effective tax rate is approximately 13% of income:
Taxes that you pay on 401(k) withdrawals are also based on tax brackets.
What Is a Marginal Tax Rate?
Thanks to its progressive tax system, the U.S. uses a marginal tax rate to determine taxes owed. A marginal tax rate determines the tax paid on an additional dollar of income that takes a taxpayer into a higher tax bracket.
The marginal tax rate increases as a taxpayer’s income increases. There are different tax rates for various levels of income. In other words, taxpayers will pay the lowest tax rate on the first “bracket” or level of taxable income, a higher rate on the next level, and so on.
When determining which tax bracket to use, you should first calculate your taxable income, including earned and investment income minus adjustments and deductions.
What Is an Effective Tax Rate?
An effective tax rate is the percentage of tax owed on taxable income. The effective tax rate is lower than the marginal tax rate because the latter breaks down your income into different tiers. Income at the first tier is taxed at a low rate, and each tier above it is taxed at a progressively higher rate than the previous level.
You can determine what your effective tax rate is by dividing your total tax by your taxable income on your federal tax return. On Form 1040, divide the figure on line 24 (your total tax) by the figure on line 15 (your taxable income), and then multiply that figure by 100.
How to Reduce Your Taxes
Deductions
Deductions decrease the amount of your income that is subject to taxes, so try to take as many as you can claim. For example, you can contribute the maximum to a retirement account at work, such as a401(k), and/or contribute to atraditional individual retirement account (IRA). If you have the option of ahigh-deductible health insurance planat work and you open a health savings account (HSA), HSA contributions made by payroll deduction are excluded from your taxable income. Aflexible spending account (FSA)can also help to reduce your taxable income.
Credits
Be sure to take advantage of tax credits you are eligible for, too. Tax credits come directly off the amount you owe in taxes to the IRS—what's known as a dollar-for-dollar perk. Examples of tax credits include the Child Tax Credit, the Earned Income Tax Credit (EITC), theAmerican Opportunity Tax Credit, the Lifetime Learning Credit (LLC), and the Saver's Credit.
State Tax Brackets
Some states have no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire doesn’t tax earned wages, but it does taxinvestment incomeand interest. However, it is phasing out those taxes now, which will bring the number of states with no income tax to nine by the end of 2024.
In 2023, 11 states had a flat rate structure, with a single rate applying to a resident’s income: Arizona (2.5%), Colorado (4.40%), Idaho (5.8%), Illinois (4.95%), Indiana (3.15%), Kentucky (4.5%), Massachusetts (5.0%), Michigan (4.25%), North Carolina (4.75%),Pennsylvania (3.07%), and Utah (4.85%).
In other states, the number of tax brackets varies from three to as many as nine (in California and New York) and even 12 (in Hawaii). The marginal tax rates in these brackets also vary considerably. California has the highest, maxing out at 12.3%.
State income tax regulations may or may not mirror federal rules. Some states allow residents to use the federal personal exemption and standard deduction amounts for figuring state income tax, while others have their own exemption and standard deduction amounts.
How Do I Know Which Tax Bracket I Am in?
The simplest way to find out what tax bracket you are in is first, to know what your filing status is (for example, single or married filing jointly) and second, to look at the federal tax brackets issued by the IRS and see which bracket your taxable income lands in. This is also known as your marginal tax rate. For example, if your filing status is married filing jointly and your taxable income is $115,000, your tax bracket is 22%.
How Much Can I Earn Before I Pay 40% Tax?
Currently, there is no 40% tax bracket. For 2023, the highest earners in the United States pay a top rate of 37% federal tax on all income made above $578,125 (single filers) and $693,750 (married couples filing jointly).
How Do I Calculate My Tax Bracket?
To estimate which tax brackets your earnings will fall under, you could do the math yourself by using the tables shown above or by visiting the Internal Revenue Service (IRS) website, which provides highly detailed tax filing statuses in increments of $50 of taxable income (over $3,000) and up to $100,000.
The Bottom Line
The federal tax system in the U.S. is progressive. Taxpayers who fall into lower brackets pay lower rates than taxpayers in higher brackets. In 2023 and 2024, there are seven federal tax brackets, with rates ranging from 10% to 37%.
Unless your taxable income lands you in the lowest tax bracket, you are charged at multiple rates as your income rises. Your entire income is not subject to the rate of the bracket classified for your total income level.
