Wednesday, March 01, 2017

What is my tax bracket? Or how to find yours.. Or just see chart below!

When looking at the big picture, you should compute your effective tax rate, which is simply your total tax liability divided by your taxable income. In Louie's example, while his marginal tax bracket is 25%, his effective tax bracket is between 14% and 15% ($5,856.25 divided by $40,000 equals 0.146). The effective rate tells Louie that most of his income is being taxed at the lower 10% and 15% brackets, and only a small portion is being taxed at the next (25%) bracket.
So, to summarize Louie's tax situation:
  • Louie's marginal tax rate: 25%.
  • Louie's effective tax rate: 14.6%.
  • Most of his dollars were taxed at the lower 10% and 15% tax rates.
  • His remaining dollars were taxed at 25%.
How to find yours
Determining your marginal and effective tax brackets is not too difficult. If you're looking for your marginal bracket, simply turn to your 2013 return (or your 2012 return if you haven't done your 2013 taxes yet). Find the number located on line 43 if you filed Form 1040, line 27 if you filed Form 1040A, or line 6 if you filed Form 1040EZ.
Next, see where that number falls in the 2013 IRS tax tables. Make sure you read the table that corresponds to your filing status. (In other words, don't use the "married" tables to find your marginal tax bracket if you're single.) That's how you'll find your marginal tax bracket. You'll also see at what rate your next dollar of income will be taxed, and you'll find out how close you might be to hitting the next bracket.
If you're looking for your effective tax rate, it's almost as simple. Grab your 2013 tax return and make the following computations:
  • If you filed Form 1040, divide the amount on line 61 by the amount on line 43.
  • If you filed Form 1040A, divide the amount on line 35 by the amount on line 27.
  • If you filed Form 1040EZ, divide the amount on line 10 by the amount on line 6.
Once you do that division, you'll arrive at your effective tax rate, which will give you a good idea of where most of your income is being taxed.

The Tax Table

The federal income tax table reports marginal tax rates on taxable income. Federal taxes are not average tax rates. Every income level, even if it is within a one dollar difference, is taxed at a different average rate. The table below shows the marginal tax rates for 2010 income.

Marginal Tax Rate
Filing as Single
Filing as Married Filing Jointly or Qualified Widow(er)
Filing as Married Filing Separately
Filing as Head of Household
$0 to $8,375
$0 to $16,750
$0 to $8,375
$0 to $11,950
$8,376 to $34,000
$16,751 to $68,000
$8,376 to $34,000
$11,951 to $45,550
$34,001 to $82,400
$68,001 to $137,300
$34,001 to $68,650
$45,551 to $117,650
$82,401 to $171,850
$137,301 to $209,250
$68,651 to $104,625
$117,651 to $190,550
$171,851 to $373,650
$209,251 to $373,650
$104,626 to $186,825
$190,551 to $373,650
$373,651 and higher
$373,651 and higher
$186,826 and higher
$373,651 and higher

Remember that you're using historical data (your 2013 tax return) to arrive at your marginal and effective brackets. If your income, deductions, and credits will remain similar in 2014, your brackets will also probably remain similar. But if you expect a large increase or decrease in your income for 2014, you might want to recheck your bracket by using the information at your disposal, along with the 2014 tax rate schedules, which you'll find on page 7 of this IRS form (link opens a PDF).