Federal Income Tax Rates and Tax Brackets for 2022–2023

The federal income tax system consists of seven brackets. Here are their characteristics, functions, and effects on you. For the 2022 tax year, there are seven federal tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Your filing status and taxable income determine your tax bracket. These rates apply to taxes that are due in April 2023. There are several places on this page where you may find the tax rates and brackets for the 2023 tax year as well as for prior years.

How Tax Rates Are Calculated

The federal income tax rates in the United States are progressive, meaning those with higher taxable incomes pay higher rates.

Being “in” a tax bracket does not mean that you must pay that amount of federal income tax on all of your earnings. Because federal income tax rates are progressive, those with higher taxable incomes must pay higher federal income tax rates. While those with lower taxable incomes must pay lower federal income tax rates.

The government divides your taxable income into portions, also known as tax brackets, and taxes each portion at the appropriate tax rate to determine how much tax you owe. This has the advantage that, regardless of your tax bracket, you won’t have to pay that rate of tax on all of your income.

Your effective tax rate is the proportion of your taxable income that you pay in taxes. Divide your entire tax liability by your total taxable income to get your effective tax rate.

Annual updates are made to the tax bracket income thresholds. The income criteria that determine the federal tax brackets are one of many sections in the tax code that are modified yearly to account for inflation. By indexing, the IRS hopes to avoid “bracket creep,” the practice of forcing people into a higher tax band as a result of inflation.

What Does “Marginal Tax Rate” Mean?

The tax rate that you paid on your final dollar of taxable income is referred to as your “marginal tax rate.” This corresponds to your highest tax bracket normally.

For instance, you would fall into the 12% tax bracket if you are a single filer with $35,000 in taxable income. If your taxable income increased by $1, you would also have to pay a 12% tax on the additional dollar.

However, if you had $46,000 in taxable income, most of it would still be subject to the 12% tax rate. While the final few hundred dollars would be subject to the 22% tax rate. In that case, your marginal tax rate would be 22%.

How to Reduce Your Federal Income Tax Rate and Move Into a Lower Tax Band

Credits and deductions are two popular strategies for lowering your tax obligation. Tax credits can lower your tax obligation dollar for dollar, regardless of your tax status.

Contrarily, tax deductions lessen the amount of your income that is liable to taxation. Deductions often reduce your taxable income by a percentage equal to the highest federal income tax bracket that you fall under. Therefore, if your tax rate is 22%, a $1,000 deduction might result in a $220 savings for you.

In other words, maximize your tax deductions because they can lower your taxable income. And move you into a lower tax band, where you would then pay a lower tax rate.
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