|Tax Bracket (Single)||Tax Bracket (Couple)||Tax Bracket (Head of Household)||Marginal Tax Rate|
The Federal Income Tax consists of six marginal tax brackets, ranging from a low of 10% to a high of 35%. There are three complete sets of tax brackets for different filing types, each with different bracket widths:
- Single - The Single brackets, applicable to all single non-joint filers, have the narrowest bracket width and generally result in the highest individual income tax.
- Couple - The Couple tax brackets are applicable to all legally married couples filing their income tax on a joint return. The width of the first three tax brackets are doubled, and the highest three brackets are expanded (but not doubled) for joint filers.
- Head of Household - Head of Household is a special filing status reserved for single individuals who support one or more dependants by themselves. Head of Household tax brackets are wider than Single brackets, but not as wide as joint brackets.
Some individuals may have to follow a special tax structure not listed here, such as the Alternative Minimum Tax (AMT) for certain high-income taxpayers.
When calculating your income tax, it's important to remember that the federal tax brackets apply to your gross adjusted income, after accounting for any tax deductions such as dependant exemptions, business expenses, and any other before-tax deductions.
If you qualify for any tax credits, such as the Earned Income Tax Credit or a Homebuyer's Tax Credit, you will deduct these credits from your total tax owed after calculating your marginal tax rates.
While you pay the marginal rates in all the tax brackets your income fills, in general terms your "tax bracket" is the bracket in which your last earned dollar of the year falls, taking your filing type into account.
A single businessperson earning $75,000 a year, for example, would fall into the third tax bracket (25%, $35k-$85k) for his pre-deduction income.Why Do Tax Brackets Exist?
The IRS introduced a bracketed income tax system in 1913 with the goal of creating a flexible income tax capable of generating revenue from the government while not overtaxing individuals who could not afford to pay.
The six-bracket system was designed to allow lower-income individuals to pay a lower overall percentage of tax on their total income than wealthy individuals, while maintaining equity by ensuring that everyone paid the same marginal income tax on each bracket regardless of what bracket they "belong in".
In addition to flexible brackets, dependant deductions and credits like the Earned Income Tax Credit (EITC) were intoduced to ensure that the lowest-income families would not be overtaxed. As a result, almost 46% of Americans owe no income tax today after accounting for all of their deductions and tax credits.Which States Collect Income Tax?
Fourty-four of the fifty states collect a state income tax, all of which are lower than the Federal Income Tax. The highest marginal tax bracket in any state is just over 10%, comparable to the lowest tax bracket in the Federal Income Tax.
While most states use a bracketed system similar to the Federal Income Tax, some use a flat income tax which collects a single, low percentage of all income from the first dollar to the last. For a listing of all of the state income tax brackets, visit the state income tax tables page.