Many are unsure of their taxable income. The fact is there is no mystery. The IRS provides a tax table and breaks it down by those filing single, married filing jointly, married filing separately, and head of household.
The approximate rate of tax for those earning under $100,000 ranges from ten to twenty-five percent. However, this varies by filing status and income. If taxable income is $100,000 or more, the tax computation worksheet at the end of the tax table form must be used.
Marginal tax rate
The tax rate will increase significantly for those with higher incomes. The marginal tax rate will range from 28-35% for those earning $100,000 to $338,350 and above.
It is essential to check the tax rates each year for specific changes in taxable income. Adjustments are made yearly to account for inflation. The current year tax table, computation worksheet, and rate schedules will have exact rates.
Tax software calculates your tax rate for you
Tax software will make the process of filing taxes easy by asking questions about income and family status. This information is used to complete the calculations for the person(s) filing their taxes.
The TurboTax Premier Edition is recommended for high income earners who often risk a greater chance of an audit. Whether software or a tax expert is used for filing, it is advantageous to read and understand the tax table.
How much can you earn before moving into a higher tax rate?
Using a tax program helps to avoid confusion, mistakes, late returns, and reduces the chance of a possible audit. Married couples may use the table to figure out whether it is more advantageous to file jointly or separately. Also, being aware of the tax rates will allow one to realize what they can earn before reaching a higher tax bracket.
Federal tax rates and state tax rates
Those who pay state income taxes will need to check the tax rates for their individual state in addition to the federal tax. If you use tax software such as TurboTax, your tax information from your federal return will be imported into your state return automatically. You don’t have to calculate your rate by using the tax table because it will be done for you.