By any measure, the United States tax code is huge. It is almost 75,000 pages with footnotes. And each Monday, the Internal Revenue Service (IRS) publishes a 20 to 50-page bulletin about various aspects of the tax code.
Fortunately, it's not necessary to wade through these massive libraries to understand how income taxes work. Understanding a few key concepts may provide a solid foundation. One of the key concepts is marginal income tax brackets. Taxpayers pay the tax rate in a given bracket only for that portion of their overall income that falls within that bracket's range.
Seeing how marginal income tax brackets work is helpful because it shows the progressive nature of income taxes. It also helps you visualize how your total tax rate can be calculated. But remember, this material is not intended as tax or legal advice. Please consult a tax professional for specific information regarding your individual situation.
Say a married couple, filing jointly, in 2022 had a taxable income of $200,000. Each dollar over $178,150 would fall into the 24% federal income tax bracket. However, the couple's total federal tax would have been $35,671, or just over 18% of their adjusted gross income.
This is a hypothetical example used for illustrative purposes only. It assumes no tax credits apply.
Your federal income tax bracket is determined by two factors: your total income and your tax-filing classification.
For the 2022 tax year, there are seven tax brackets for ordinary income — ranging from 10% to 37% — and four classifications: single, married filing jointly, married filing separately, and head of household.
| 2022 Single Return Rate Schedule | |
|
Taxable Income Levels |
Tax Rate |
|
0 to $10,275 (0 to $9,950 in 2021) |
10% |
|
$10,276 to $41,775 ($9,951 to $40,525 in 2021) |
12% |
|
$41,776 to $89,075 ($40,526 to $86,375 in 2021) |
22% |
|
$89,076 to $170,050 ($86,376 to $164,925 in 2021) |
24% |
|
$170,051 to $215,950 ($164,926 to $209,425 in 2021) |
32% |
|
$215,951 to $539,900 ($209,426 to $523,600 in 2021) |
35% |
|
Over $539,900 (over $523,600 in 2021) |
37% |
| 2022 Married Filing Jointly Rate Schedule | |
|
Taxable Income Levels |
Tax Rate |
|
0 to $20,550 (0 to $19,900 in 2021) |
10% |
|
$20,551 to $83,550 ($19,901 to $81,050 in 2021) |
12% |
|
$83,551 to $178,150 ($81,051 to $172,750 in 2021) |
22% |
|
$178,151 to $340,100 ($172,751 to $329,850 in 2021) |
24% |
|
$340,101 to $431,900 ($329,851 to $431,850 in 2021) |
32% |
|
$431,901 to $647,850 ($418,851 to $628,300 in 2021) |
35% |
|
Over $647,850 (over $628,300 in 2021) |
37% |
In 1944, the highest federal income tax bracket was 94%. It applied to all income above $200,000 a year and applied to all taxpayers, regardless of filing status.
Source: Tax Policy Center, 2015
In 1913 -- immediately after the 16th Amendment gave Congress the power to levy taxes on income -- the government set up a system of seven federal income tax brackets with rates ranging between 1% and 7%. Less than one in 100 people had to pay even the lowest rate.
Source: OurDocuments.gov, 2017, August 6, 2017
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2022 FMG Suite.