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How To Determine Your Income Tax Bracket

Federal Tax Brackets, Rates, and Filing Statuses

In order to properly file your federal income tax return and pay any tax that you owe, it is necessary to understand your income tax bracket, your filing status, and which income tax rate(s) apply to you. There are currently seven marginal income tax brackets and five federal filing statuses. The amount of tax you owe will depend on your filing status and how much taxable income you earn during the year.

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This article discusses marginal income tax brackets, federal filing statuses, and income tax rates, so you can start preparing for the 2019 filing season and developing a tax strategy.

Marginal Income Tax Brackets

Your marginal income tax bracket basically represents the highest tax rate that you must pay on your income. There are seven income tax brackets for each federal filing status: 10, 12, 22, 24, 32, 35, and 37 percent.

The marginal tax bracket system is a gradual tax schedule, which essentially means the more you earn, the more tax you pay. The amount of taxable income that you earn determines which tax bracket(s) you fall into. It is important to realize that only the money you earn within a certain tax bracket is taxed at that rate. In other words, if you earned more in 2018 than you did in 2017 and thus moved into a higher tax bracket, only the money that falls within that higher tax bracket is taxed at the higher rate.

So, for example, if you move from the 22 percent tax bracket to the 24 percent tax bracket, you may make the mistake of believing that all of your income is now taxed at that higher rate. However, only the money that you earn within the 24 percent bracket is taxed at that rate.

The structure of federal income tax brackets was first implemented by the IRS in the early 1900s in an attempt to create a progressive tax system that would demand less from lower-income individuals. This system, plus a series of tax credits and tax deductions, have allowed nearly half of Americans to avoid owing federal income tax altogether.

IRS Filing Statuses

Your filing status determines your filing requirements (whether or not you are required to file a tax return), your standard deduction amount, your eligibility for certain tax breaks, and your income tax rate. There are five federal filing statuses based on marital status and other conditions: single, married filing separately, married filing jointly, head of household, and qualifying widow(er) with dependent child.

When you fill out your federal income tax return, you must specify what your filing status is on the tax form. Review each filing status carefully and choose the one that best fits your situation. If you qualify for more than one filing status, you are allowed to choose the one that offers you the lowest tax liability.

Single

You can file as “Single” if any of the following were true on the last day of the tax year (December 31, 2018 for calendar year filers):

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  • You were never married
  • You were legally separated by decree of divorce or separate maintenance
  • You were widowed before January 1, 2018 and you didn’t remarry before the end of 2018

Married Filing Separately

You can file as “Married Filing Separately” if you are married and want to file separate income tax returns. You will need to provide your spouse’s name and Social Security Number (SSN) or ITIN (Individual Taxpayer Identification Number) on your tax return, but you will generally report only your own income, deductions, and credits. Note that filing a joint return can often lead to a lower tax liability for married couples, so you should consider your filing status options before submitting your return.

Married Filing Jointly

A married couple that files a joint tax return will report their combined income and deduct their combined allowable expenses on the same tax return form. A married couple can file a joint return even if only one spouse had income. You can file as “Married Filing Jointly” if any of the following apply:

  • You were legally married at the end of the year (December 31, 2018 for calendar year filers)
  • Your spouse died in 2018 and you didn’t remarry in 2018
  • You were married at the end of the year (December 31, 2018 for calendar year filers) and your spouse died in 2019 before filing a 2018 tax return

Head of Household

To qualify for this filing status, you must be paying more than half the costs to maintain your home and have a qualifying dependent (such as a child or relative) who has lived in your home with you for over 6 months. This filing status is typically used by single parents who have primary custody of their children. (Note that certain exceptions apply to special situations.) Filing as “Head of Household” tends to offer more tax benefits than the “Single” or “Married Filing Separately” statuses, including lower tax rates and higher standard deductions. You can file as “Head of Household” if you are unmarried and you provide a home for certain other persons (usually any person you can claim as a dependent). For the purpose of this filing status, you are considered unmarried if any of the following applies:

  • You were legally separated by decree of divorce or other separate maintenance at the end of 2018
  • You are married but lived apart from your spouse for the last 6 months of 2018, and you meet other requirements (see the Instructions for IRS Form 1040)
  • You are married to a nonresident alien and you don’t chose to treat your spouse as a resident alien

Qualifying Widow/Widower with Dependent Child

This filing status can only be used by a widow or widower who lives with their dependent child and has not remarried. The “Qualifying Widow(er)” status basically allows individuals to use the same tax rates as those who are Married Filing Jointly, as well as the highest standard deduction. You can use this filing status if all of the following apply (for exceptions to these rules, see the Instructions for IRS Form 1040):

  • Your spouse died in 2016 or 2017 and you didn’t remarry before the end of 2018
  • You have a child or stepchild whom you can claim as a dependent
  • The child lived in your home for all of 2018
  • You paid over half the cost of keeping up your home
  • You were eligible to file a joint return with your spouse the year that he/she died (even if you did not actually file a joint return)

To get some help determining your correct filing status, try the IRS online tool: What Is My Filing Status?

For more information about filing statuses, see the Instructions for IRS Form 1040.

2018 Federal Income Tax Brackets & Rates

These are the tax rates for the 2018 tax year, listed by filing status. Remember that 2018 income tax returns are due by Tuesday, April 15, 2019.


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