Chief Tax Information Officer
Published on: June 19, 2019
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An individual’s tax bracket is determined by their filing status, as well as their taxable income, so a married couple filing jointly will be in a different tax bracket than they would were they to file separately. Taxable income means the total of all income from all sources – not just wages – less any adjustments and deductions.
The US tax system is a progressive system of rates based on taxable income. To determine your marginal tax rate – the percent of taxes you actually paid, divide your taxes by your income; the result is your marginal tax rate.
Each year all tax brackets are slightly broader, based on inflationary adjustments. Generally, if your income remains the same each year, your taxes will go down slightly based on the annual changes.
How Tax Brackets Work
The current income tax brackets are 10, 12, 22, 24, 32, 35, and 37 percent, respectively. Since the IRS uses a progressive tax system, the greater your income, the more taxes you pay. However, this does not mean you pay a fixed tax rate on your entire income. For instance, if your filing status is Single and your taxable income is $29,350, you will pay 10% on the initial $9,525 of your taxable income and 12% on the amount remaining. Prior to tax reform, you would have paid 10% on the initial $9,525, and 15% on the rest of your income. As you can see, you are not usually in one single tax bracket – based on your taxable income, are likely to fall into two or more brackets.
Also, these rates apply to income acquired from ordinary sources. Different rates apply to capital gains income.
State Tax Brackets
Income tax rules and regulations will vary from state to state. Thus, while some states have no income tax, others have a flat rate structure. Still others have tax brackets similar to that of federal taxes, with varying marginal tax rates. For instance, California has 9 tax brackets, Missouri has 10 brackets each, while Hawaii has 12.
The tax brackets change each year based on inflationary adjustments – so be sure you are using the correct year’s tax rates when determining your taxes.
About the Author
Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.