How federal income tax is calculated
Federal income tax starts with your gross income. Subtract the standard deduction (or itemized deductions) and any other deductions to reach taxable income. That taxable income is then split across seven brackets, taxed at 10%, 12%, 22%, 24%, 32%, 35% and 37%.
Each rate applies only to the income inside its bracket. Moving into a higher bracket never raises the tax on the income below it. The IRS publishes the current figures on its federal income tax rates and brackets page.
Marginal rate, effective rate and estimated payments
Your marginal rate is the rate on your highest dollar of taxable income. Your effective rate is total tax divided by gross income, which is almost always lower. The effective rate is the better guide for how much of your income to set aside.
If you are self-employed, you may need to make quarterly estimated payments and pay self-employment tax on top of income tax. Our bank statement tax calculator includes self-employment tax.
How to use the calculator
Enter your gross annual income. The single-filer standard deduction is applied for you, and you can add other deductions on separate lines. The brackets come pre-filled and can be edited to match the current IRS tables.
Results show taxable income, total tax, effective and marginal rates and income after tax, with a bracket-by-bracket breakdown. Export to Excel to keep a copy. State and local taxes are not included.