Federal income tax brackets are the income ranges used by the IRS to apply different tax rates to a taxpayer’s income. The U.S. tax system is progressive, meaning that taxpayers with higher income pay a higher tax rate. Tax brackets are updated annually to adjust for inflation and apply to different income levels depending on the taxpayer’s filing status.
For example, for the 2023 tax year, the federal income tax brackets for single filers are as follows:
- 10% on income up to $11,000.
- 12% on income between $11,001 and $44,725.
- 22% on income between $44,726 and $95,375.
- 24% on income between $95,376 and $182,100.
- 32% on income between $182,101 and $231,250.
- 35% on income between $231,251 and $578,125.
- 37% on income over $578,126.
Each portion of income is taxed at the rate applicable to its respective bracket, and only the income that falls within a particular bracket is taxed at that rate. For example, a taxpayer who earns $50,000 will not pay 22% on the entire amount. Instead, they pay 10% on the first $11,000, 12% on the income between $11,001 and $44,725, and 22% on the income between $44,726 and $50,000.
The tax bracket system ensures that taxpayers with higher incomes pay a higher marginal tax rate, while lower-income individuals pay a smaller percentage of their income in taxes. By understanding the tax brackets and how they apply to their income, taxpayers can calculate their effective tax rate and plan for their tax liability accordingly.