How to determine what tax bracket you are in

Each bracket of your income is taxed at a different rate. As you make more money, a higher percentage may be owed in taxes.

Taxable income, single filer

Tax rate

10% $0 - $10,275

12% $10,275.01 - $41,775

22% $41,775.01 - $89,075

24% $89,075.01 - $170,050

32% $170,050.01 - $215,950

35% $215,950.01 - $539,900

37% Over $539,900

Taxable income, married and filing jointly

Tax rate

10% $0 - $20,550

12% $20,550.01 - $83,550

22% $83,550.01 - $178,150

24% $178,150.01 - $340,100

32% $340,100.01 - $431,900

35% $431,900.01 - $647,850

37% Over $647,850

Source: https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2022

So what does this mean?

Joe is single and has $50,000 in taxable income. Let’s calculate his taxes.

From $0 - $10,275, Joe is taxed at 10%.

$10,275 x 10% = $1,027.50

From $10,275.01 - $41,775, Joe is taxed at 12%.

$31,499.99 x 12% = $3,779.99

From $41,775.01 - $50,000, Joe is taxed at 22%.

$8,224.99 x 22% = $1,809.49

TOTAL TAX = $6,616.98

Joe’s marginal tax rate—the rate he pays on his top bracket—is 22%. But in reality, Joe’s tax liability—his effective tax rate—is about 13% of his taxable income.

Lisa is single and has $100,000 in taxable income.

From $0 - $10,275, Lisa is taxed at 10%.

$10,275 x 10% = $1,027.50

From $10,275.01 - $41,775, Lisa is taxed at 12%.

$31,499.99 x 12% = $3,779.99

From $41,775.01 - $89,075, Lisa is taxed at 22%.

$47,299.99 x 22% = $10,405.99

From $89,075.01 - $100,000, Lisa is taxed at 24%.

$10,924.99 x 24% = $2,621.99

TOTAL TAX = $17,835.47

Lisa’s marginal tax rate is 24%. But in reality, Lisa’s tax liability gives her an effective tax rate of about 18%.

Say Lisa and Joe fall in love and get married. They decide to file a joint tax return, with a combined taxable income of $150,000.

The first $0 - $20,550 they make is taxed at 10%.

$20,550 x 10% = $2,055

From $20,550.01 - $83,550, they are taxed at 12%.

$62,999.99 x 12% = $7,559.99

From $83,550.01 - $150,000, they are taxed at 22%.

$66,449.99 x 22% = $14,618.99

TOTAL TAX = $24,233

If they had stayed single, Joe and Lisa would have paid a combined $24,452. Filing jointly saves them $219, sometimes referred to as a “marriage benefit.”

If Joe and Lisa’s tax liability had been higher as a married couple filing jointly, the extra funds owed would be referred to as a “marriage penalty.”

But that’s not all ...

Different credits and deductions based on life events could affect Joe and Lisa’s tax liability.

If they start a family, they may qualify for new deductions and child care credits, and their tax liability would likely shrink.

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• There are seven federal income tax brackets, ranging from 10% for the lowest income levels up to 37% for the highest income levels.
• Brackets are part of a progressive taxation system that charges increasingly higher rates on different tiers of income.
• Your marginal tax rate is what you pay on the last dollar of income, while your effective tax rate is the overall average rate you pay on all of your income.

• See Personal Finance Insider's picks for the best tax software »

The US uses a progressive federal income tax system. To determine the tax someone owes, the government uses a system of brackets, where different chunks of a person's earnings are taxed at rates that get gradually higher as the total amount of income increases.

You can use tax brackets to estimate how much you'll pay in taxes for the year. However, a common misperception is that someone whose total taxable income puts them into, say, the 22% tax bracket means that they pay 22% on all of their money. In fact, they would only pay that much on the upper-most portion of it. The rate they pay on the last dollar is known as the marginal tax rate.

How tax brackets work 

There are seven brackets for 2022 and 2023, ranging from 10% to 37%. Yours will depend on your income level and filing status.

"Your tax bracket is evaluated by viewing all your income, including required minimum distributions (RMDs) from IRAs, Social Security and possibly even a pension if you are fortunate to have one," says Peter J. Klein, founder and chief investment officer at ALINE Wealth. From this income, you can take deductions and adjustments to reduce your taxable income, and thus lower your tax bracket.

You can choose to take the standard deduction for the year or use itemized deductions. The standard deduction for the 2022 tax year is $12,950 for single filers and married individuals filing separately. For heads of household it's $19,400. For married couples filing jointly, the 2022 standard deduction is $25,900. Standard deductions for 2023 increase to $13,850 for single filers, $20,800 for heads of households, and $27,700 for married couples.

You can also subtract adjustment such as IRA contributions and student loan interest from your adjusted gross income. The resulting dollar amount will determine what marginal tax bracket you're in.

2022 and 2023 federal income tax brackets by filing status 

Below are the federal income tax brackets for single filers, heads of household, and married people who file either jointly and separately for 2022 and 2023.

2022 federal income tax brackets

Rate

Single

Married filing jointly

Married filing separately

Head of household

10%

$0 to $10,275

$0 to $20,550

$0 to $10,275

$0 to $14,650

12%

$10,276 to $41,775

$20,551 to $83,550

$10,276 to $41,775

$14,651 to $55,900

22%

$41,776 to $89,075

$83,551 to $178,150

$41,776 to $89,075

$55,901 to $89,050

24%

$89,076 to $170,050

$178,151 to $340,100

$89,076 to $170,050

$89,051 to $170,050

32%

$170,051 to $215,950

$340,101 to $431,900

$170,051 to $215,950

$170,051 to $215,950

35%

$215,951 to $539,900

$431,901 to $647,850

$215,951 to  $323,925

$215,951 to $539,900

37%

$539,901 and over

$647,851 and over

$323,926 and over

$539,901 and over

2023 federal income tax brackets

Rate

Single

Married filing jointly

Married filing separately

Head of household

10%

$0 to $11,000

$0 to $22,000

$0 to $11,000

$0 to $15,700

12%

$11,00 to $44,725

$22,000 to $89,450

$11,00 to $44,725

$15,700 to $59,850

22%

$44,725 to $95,375

$89,450 to $190,750

$44,725 to $95,375

$59,850 to $95,350

24%

$95,375 to $182,100

$190,750 to $364,200

$95,375 to $182,100

$95,350 to $182,100

32%

$182,100 to $231,250

$364,200 to $462,500

$182,100 to $231,250

$182,100 to $231,250

35%

$231,250 to $578,125

$462,500 to $693,750

$231,250 to $578,125

$231,250 to $578,100

37%

$578,125 and over

$693,750 and over

$578,125 and over

$578,100 and over

How to calculate your tax liability using brackets

So let's say you're an individual filer with adjusted gross income of $65,000 in 2022 and take the standard deduction of $12,950. That leaves taxable income of $52,050, putting you in the 22% bracket. But it doesn't mean you pay 22% tax on all of your earnings. Instead, your income would be taxed as follows:

• $10,275 taxed at 10%, resulting in $1,028 of income taxes
• The amount between $10,276 and $41,775 (or $31,499) taxed at 12%, for a total tax of $3,780
• The amount between $41,776 and $52,050 (or $10,274) taxed at 22%, for a total tax of $2,260

So putting it all together, your total federal income tax for the year would be $7,068.

The actual percentage you pay on the entirety of your taxable income is called the effective tax rate. You calculate your effective tax rate by dividing your total tax liability, $7,068, by your annual taxable income, $52,050. That's an effective tax rate of 13.6%.

Note: Your effective tax rate is the actual percentage of taxes you pay overall. Your marginal tax rate is the highest tax rate your taxable income falls into.

Why is it important to know my tax bracket?

If your marginal tax rate doesn't tell you how much tax you'll actually pay, why do you even need to know what it is? For one thing, it's because you can only determine your effective tax rate by calculating total tax liability.

Likewise, understanding which bracket you're in helps you understand any implications of how changes in your earnings will affect your overall tax burden, says Sri Reddy, senior vice president of retirement and income solutions at Principal Financial Group.

"Even a minimal pay increase could kick you up into a higher percentage of tax payment, as well as impact whether you qualify for things such as the child tax credit," Reddy says. 

Knowing your marginal tax bracket can also influence how you approach the available deductions, such as if you choose to use the standard deduction or itemize, and perhaps give a large lump sum to charity to reduce your taxable income, Reddy says.

Your marginal tax rate can also inform your other financial decisions.

"We often find clients will calculate the amount to convert to Roth, how to contribute to a retirement plan, when to sell or hold long-term capital gains, and potentially how much to give to charity based on their tax bracket," says David S. Elder, wealth manager and partner at Merit Financial Advisors.

If you're in a higher tax bracket, you may want to prioritize pre-tax savings such as those in a traditional IRA or 401(k) to reduce your current tax bill. Meanwhile, someone in a lower tax bracket may use the opportunity to fund a Roth IRA, which doesn't qualify for a current tax deduction but can also generate tax-free income in retirement.

Understanding your marginal tax bracket is particularly important for retirees and pre-retirees. "If you have accounts that are pre-tax and will require minimum distributions upon reaching age 72, you may not want to wait that long if you're in a lower tax bracket," says Neel Shah, a certified financial planner and estate planning attorney with Shah Total Planning. 

Elder also gives the example of a married couple filing jointly with taxable income of $65,000. If this couple wants to do a Roth conversion, which would require claiming the amount they convert as part of their taxable income, they may choose to only do an amount that allows them to stay in the 12% bracket, he says. In 2022, they'd limit their conversion to $18,550 so their income would stay below $83,550.

The bottom line

The US federal tax system can seem complex and confusing, but once you understand how tax brackets work, the math is fairly simple. All you need to know to determine your marginal tax bracket is your filing status and total taxable income. Once you know your marginal tax bracket, you know how much tax you'll pay on each dollar of income. You can then calculate your effective tax rate based on your total tax liability for the year. 

This may sound like a lot of math for something the IRS will determine for you come April. But knowing your tax bracket before it comes time to file your taxes can help you reduce how much tax you ultimately pay.

"Although you cannot always dictate your level of income if you are a W-2 employee, you may be able to manipulate the amount of income you take in a particular year from your investment portfolio, from your retirement accounts, as well as your business, if you are a business owner," Shah says.

There is a saying in investing not to let the tax tail wag the investing dog. While it's generally true that taxes should not be the sole basis for your financial decisions, it's equally true that to ignore the impact taxes have on your finances can also be detrimental.