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Marginal Income Tax Brackets

Find Your IRS Tax Brackets and Tax Rates

Many people do not understand their marginal income tax bracket and how it affects them. In turn, they can end up making financial decisions that are actually less beneficial in the long run. One of the most common misconceptions is that moving into a higher tax bracket (e.g., from a salary increase) has a negative impact for the taxpayer because more tax is due.

For example, if you move from the 22% tax bracket to the 24% tax bracket, you may think that all of your income is taxed at that higher rate. However, only the money that you earn within the 24% bracket is taxed at that rate.

RELATED: 2019 Federal Tax Calendar

The marginal income tax rate system is known as a “gradual tax schedule.” That basically means: as you make more money, you pay more tax.

For tax year 2018, there are 7 marginal income tax brackets for each filing status:
10%, 12%, 22%, 24%, 32%, 35%, and 37%

Your marginal tax bracket is the highest tax rate that you will pay on your income.

2018 Income Tax Rates

Listed below are the 2018 individual income tax rates, organized by federal filing status.

Single

Taxable Income Tax Rate
$0 – $9,525 10% of taxable income
$9,526 – $38,700 $952.50 plus 12% of the amount over $9,525
$38,701 – $82,500 $4,453.50 plus 22% of the amount over $38,700
$82,501 – $157,500 $14,089.50 plus 24% of the amount over $82,500
$157,501 – $200,000 $32,089.50 plus 32% of the amount over $157,500
$200,001 – $500,000 $45,689.50 plus 35% of the amount over $200,000
$500,001 or more $150,689.50 plus 37% of the amount over $500,000

 

Married Filing Jointly or Qualifying Widow(er)

Taxable Income Tax Rate
$0 – $19,050 10% of taxable income
$19,051 – $77,400 $1,905 plus 12% of the amount over $19,050
$77,401 – $165,000 $8,907 plus 22% of the amount over $77,400
$165,001 – $315,000 $28,179 plus 24% of the amount over $165,000
$315,001 – $400,000 $64,179 plus 32% of the amount over $315,000
$400,001 – $600,000 $91,379 plus 35% of the amount over $400,000
$600,001 or more $161,379 plus 37% of the amount over $600,000

 

Married Filing Separately

Taxable Income Tax Rate
$0 – $9,525 10% of taxable income
$9,526 – $38,700 $952.50 plus 12% of the amount over $9,525
$38,701 – $82,500 $4,453.50 plus 22% of the amount over $38,700
$82,501 – $157,500 $14,089.50 plus 24% of the amount over $82,500
$157,501 – $200,000 $32,089.50 plus 32% of the amount over $157,500
$200,001 – $300,000 $45,689.50 plus 35% of the amount over $200,000
$300,001 or more $80,689.50 plus 37% of the amount over $300,000

 

Head of Household

Taxable Income Tax Rate
$0 – $13,600 10% of taxable income
$13,601 – $51,800 $1,360 plus 12% of the amount over $13,600
$51,801 – $82,500 $5,944 plus 22% of the amount over $51,800
$82,501 – $157,500 $12,698 plus 24% of the amount over $82,500
$157,501 – $200,000 $30,698 plus 32% of the amount over $157,500
$200,001 – $500,000 $44,298 plus 35% of the amount over $200,000
$500,001 or more $149,298 plus 37% of the amount over $500,000

Understanding Marginal Tax Brackets

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. While it is the goal of many taxpayers to keep their income in the lower tax bracket, remember that the gradual tax schedule ensures that not all of your income is taxed at a higher 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 [Source: The Tax Foundation].

If you understand marginal income tax brackets and how they work, you can use this knowledge to help save money on your income taxes. If you are close to one of the marginal tax bracket limits, you can actually avoid moving into the next tier by controlling the amount of income that you earn. However, it’s recommended that you run the numbers and consider your particular situation before implementing a specific tax strategy, because owing less tax means earning less income.

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.


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