Calculate taxes.

The U.S. tax system is a progressive tax system, meaning that as your income increases, so does the tax rate you pay. But that does not mean you pay taxes on all income at the same rate. Rather, a marginal rate is used so that income earned within certain margins is taxed at one rate. The next dollar of income earned above that margin, but below the next highest margin, is taxed at a higher rate.

Your marginal rate (tax bracket) depends on your filing status (single, married filing separately, married filing jointly or head of household) and your taxable income. Use the Interactive Tax Assistant Links to an external site. from the IRS to determine your filing status. Taxable income is your gross income minus any allowable adjustments (like contributions to retirement accounts, student loan interest or health savings accounts), itemized or standard deductions (like medical or work-related education expenses) and exemptions (usually a personal exemption and one for each dependent child). The next section of this course discusses deductions and exemptions more fully as well as introduce tax credits.

Having a general idea about your tax bracket is helpful when making significant financial decisions. But it can be very complicated, and there are limits to taking certain deductions. If you want more information about how taxable income is calculated, work through IRS Form 1040 Links to an external site..

Current federal tax brackets (2018):

Rate	Single, taxable income over this amount, but below the next amount	Married filing jointly, taxable income over this amount, but below the next amount	Head of household, taxable income over this amount, but below the next amount
10%	$0	$0	$0
12%	$9,525	$19,050	$13,600
22%	$38,700	$77,400	$51,000
24%	$82,500	$165,000	$82,500
32%	$157,500	$315,000	$157,500
35%	$200,000	$400,000	$200,000
37%	$500,000	$600,000	$500,000

 

Consult the IRS website Links to an external site. to learn more about taxable and nontaxable income.

 

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