Income Tax Guide: How US Tax Brackets Work
The US federal income tax is progressive — you pay higher rates only on the portion of income that falls into each higher bracket, not on your entire income. This single fact clears up the most common tax misunderstanding. This guide walks through the calculation step by step.
Marginal Tax Brackets
Each bracket applies only to the income that falls within its range.
Example (2026 single-filer brackets simplified): 10% on $0–$11,925; 12% on $11,925–$48,475; 22% on $48,475–$103,350. If you earn $60,000 taxable income:
- 10% × $11,925 = $1,192.50
- 12% × ($48,475 − $11,925) = 12% × $36,550 = $4,386
- 22% × ($60,000 − $48,475) = 22% × $11,525 = $2,535.50
- Total tax = $8,114 → effective rate ≈ 13.5%
The Standard Deduction
Your taxable income is NOT your gross income. Most filers take the standard deduction (~$14,600 single in 2024), which reduces taxable income dollar-for-dollar. So $60,000 gross → ~$45,400 taxable, dropping you into a lower bracket region.
"I'm in the 22% bracket" does NOT mean you pay 22% of your income in tax. Your marginal rate is the rate on your last dollar; your effective rate is the average across all brackets, always lower.
Credits vs. Deductions
- Deductions reduce taxable income. A $1,000 deduction at the 22% bracket saves $220.
- Credits reduce tax directly. A $1,000 credit saves $1,000 — worth far more. Some (EITC, Child Tax Credit) are refundable, meaning they can push your tax below zero and you get a refund.
From Gross to Take-Home
Take-home = Gross − federal tax − state tax (if applicable) − FICA (Social Security 6.2% + Medicare 1.45%) − benefits − retirement contributions. State income tax varies wildly — from 0% (Texas, Florida) to 13.3% top rate (California).
Put It Into Practice
Enter your gross income, filing status, and state to see your federal tax, state tax, FICA, and estimated take-home pay.
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