Understanding how your income falls into different tax brackets can help with tax planning.
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Key takeaways
- The IRS uses 7 brackets to calculate your tax bill based on your income and filing status.
- As your income rises it can push you into a higher tax bracket and may increase how much you owe.
- You don’t pay the same tax rate on every dollar of income. Your income is broken down by thresholds. As you surpass each threshold, your income gradually moves to a higher bracket with a higher tax rate.
- Your marginal tax rate is the rate you pay on your highest dollar of income. Your effective tax rate is the total percentage of income you pay in taxes.
- You can potentially lower your tax bill by contributing more to retirement plans, claiming more deductions, delaying income until the following year, and tax-loss harvesting.
Figuring out how much you owe for taxes can be complex and sometimes takes some work. That’s because the federal government and the Internal Revenue Service (IRS) don’t assess the same amount of tax for every dollar you earn. Instead, the IRS assigns your income to brackets with tax rates that increase as you earn more money.
Following are the federal tax tables and how to make sense of them to potentially reduce your upcoming tax bill.
2022 tax brackets
| Tax rate | Single filers | Married couples filing jointly | Married couples filing separately | Head of household |
|---|---|---|---|---|
| 10% | $10,275 or less | $20,550 or less | $10,275 or less | $14,650 or less |
| 12% | $10,276 to $41,775 | $20,551 to $83,550 | $10,276 to $41,775 | $14,651 to $55,900 |
| 22% | $41,776 to $89,075 | $83,551 to $178,150 | $41,776 to $89,075 | $55,901 to $89,050 |
| 24% | $89,076 to $170,050 | $178,151 to $340,100 | $89,076 to $170,050 | $89,051to $170,050 |
| 32% | $170,051 to $215,950 | $340,101 to $431,900 | $170,051 to $215,950 | $170,051 to $215,950 |
| 35% | $215,951 to $539,900 | $431,901 to $647,850 | $215,951 to $323,925 | $215,951 to $539,900 |
| 37% | $539,901 or more | $647,851 or more | $323,926 or more | $539,901 or more |
Source: Internal Revenue Service
2023 tax brackets
| Tax rate | Single filers | Married couples filing jointly | Married couples filing separately | Head of household |
|---|---|---|---|---|
| 10% | $11,000 or less | $22,000 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% | $578,126 or more | $693,751 or more | $346,876 or more | $578,101 or more |
Source: Internal Revenue Service
2024 tax brackets
| Tax rate | Single filers | Married couples filing jointly | Married couples filing separately | Head of household |
|---|---|---|---|---|
| 10% | $11,600 or less | $23,200 or less | $11,600 or less | $16,550 or less |
| 12% | $11,601 to $47,150 | $23,201 to $94,300 | $11,601 to $47,150 | $16,551 to $63,100 |
| 22% | $47,151 to $100,525 | $94,301 to $201,050 | $47,151 to $100,525 | $63,101 to $100,500 |
| 24% | $100,526 to $191,950 | $201,051 to $383,900 | $100,526 to $191,150 | $100,501 to $191,150 |
| 32% | $191,951 to $243,725 | $383,901 to $487,450 | $191,151 to $243,725 | $191,151 to $243,700 |
| 35% | $243,726 to $609,350 | $487,451 to $731,200 | $243,276 to $365,600 | $243,701 to $609,350 |
| 37% | $609,351 or more | $731,201 or more | $365,601 or more | $609,351 or more |
Source: Internal Revenue Service
How do tax brackets work?
The US has a progressive tax system at the federal level with 7 tax brackets. As you earn more money, the additional income jumps to a higher bracket with a higher tax rate. (Over a certain amount, your income is taxed no further.) The Internal Revenue Service adjusts federal income tax brackets annually to account for inflation, and the new brackets can help you estimate your tax obligation based on your income and filing status for the year.
For example, a hypothetical single filer would owe 10% on the first $11,600 of taxable income in 2024 whether that amount represents their total earnings, or they earn $1 million. The next tax bracket is 12% of taxable income levels between $11,601 to $47,150. The tax rates continue to increase as someone’s income moves into higher brackets.
The IRS uses different federal income tax brackets and ranges depending on filing status:
- Single filers
- Married couples filing a single joint return together
- Married couples who each file a separate tax return
- Heads of households who are unmarried but taking care of a child or other qualifying dependent
Read more in Viewpoints about how tax brackets work.
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How do you figure out what tax bracket you’re in?
You can figure out what tax bracket you’re in using the tables published by the IRS (see tables above). To figure out your tax bracket, first look at the rates for the filing status you plan to use: single, married filing jointly, married filing separately, or head of household.
Next, determine your taxable income. Start by adding up all the income you’ve earned for the year that will be taxed, such as from salary, bonuses, tips, freelance income, alimony, and interest earnings. Subtract things like 401(k) contributions, HSA contributions, and health insurance premiums (all of these are already factored into your W-2, if you will receive one.) Then subtract the standard deduction, or deductions if you plan to itemize. The difference is your total taxable income.
Note: The top tax rate your income falls into is not the actual rate you’ll pay. It’s the rate you’ll pay on the amount of income that falls into the last bracket.
Find the appropriate boxes listing the income thresholds for your taxable income and filing status to determine how much of your income you’ll pay in each bracket.
What is your federal marginal tax rate?
The federal marginal tax rate is the federal income tax rate owed on your highest dollar of income. For example, if your income falls into the 24% tax bracket, your federal marginal tax rate is 24%. You might owe 24 cents for every dollar you earn. If your income pushes you into a higher tax bracket, your marginal tax rate increases to that next percentage, and you’d owe a higher share of taxes on the additional income.
What is your federal effective tax rate?
Your federal effective tax rate is the total percentage of your income you pay in federal income tax, calculated by dividing what you owe in taxes by your total income. It essentially sums up how much you owe for each tax bracket into one percentage. For example, assume a hypothetical taxpayer who is married with $150,000 of joint income in 2024 and claiming the standard deduction of $29,200.
They would owe the following taxes:
- 10% of the first $23,200 = $2,320
- 12% of the next $71,100 = $8,532
- 22% of the remaining $26,500 = $5,830
They owe $23,106 of total taxes on $150,000 of income. Their effective tax rate is then $16,682/$150,000 = 11.1%.
Potential ways to get into a lower tax bracket
You can potentially get into a lower tax bracket by reducing your taxable income for the year. Here are some tactics to consider:
- Maximize potential tax breaks. Any deductions you claim if you itemize could reduce your taxable income, which can push you into a lower tax bracket. Ensure you are using all the deductions you are eligible for.
- Consider bunching deductions if you plan to itemize. Bunching means concentrating deductions in a single year, then skipping one or even several years. This strategy can work well when your total itemized deductions for a single year fall below the standard deduction. Charitable contributions for several years made at once may allow the total of itemized deductions to exceed the standard deduction, making it possible to obtain a tax deduction for at least part of the charitable contributions. However, this strategy requires having the financial capacity to pack more than a year’s worth of your contributions into a single year. Deducting charitable contributions may be subject to AGI limits depending on the receiving charity and what you donated.
- Maximize retirement savings. If you have access to a workplace plan such as a 401(k) or a traditional individual retirement account (IRA) each dollar you contribute may reduce your annual taxable income.1 Alternatively, you could contribute to a Roth IRA or Roth 401(k). You don’t get an upfront tax deduction, but your retirement withdrawals would be tax- and- penalty free, assuming you’ve met the 5-year aging rule and other conditions. This may help keep you in a lower tax bracket after you stop working. No IRA? Explore the options.
- Health savings account (HSA). A health savings account (HSA) allows you to put money aside if you have a high-deductible health insurance plan. The money you contribute to an HSA reduces your taxable income, which can lower your tax bracket.
- Tax-loss harvesting. If you invest in a taxable brokerage account, you could consider delaying the sale of profitable investments until the following year if you expect your income to be lower. You could also sell investments that have lost value to reduce your taxable income and possibly your tax bracket. This strategy, known as tax-loss harvesting, generally allows you to sell investments that are down, replace them with new, reasonably similar investments, and then use those losses to offset realized investment gains. Any leftover net capital losses can offset up to $3,000 of ordinary income each year. Further losses can be carried forward to a future tax year. Note: Wash-sale rules may apply, meaning you can’t sell most investments for a loss and reinvest in the same, or a substantially identical one, 30 days prior to or after the sale, or you’ll lose the tax break.
- Consider delaying income. If you expect to have more income than usual, such as from freelance or gig work, an annual bonus, or sales commissions, consider asking for a delayed payout until the following year, which could lower your income for the current year.
Consult a tax advisor to help you pinpoint your exact tax bracket and, more importantly, the strategies you can use to reduce how much you owe.
