Understanding Federal Income Tax
The U.S. uses a progressive tax system, meaning higher income is taxed at higher rates. But here's the key insight: only the income in each bracket is taxed at that bracket's rate — not your entire income.
2024 Federal Tax Brackets (Single Filers)
| Tax Rate | Income Range | Tax Owed |
|---|---|---|
| 10% | $0 - $11,600 | 10% of income |
| 12% | $11,601 - $47,150 | $1,160 + 12% over $11,600 |
| 22% | $47,151 - $100,525 | $5,426 + 22% over $47,150 |
| 24% | $100,526 - $191,950 | $17,168 + 24% over $100,525 |
| 32% | $191,951 - $243,725 | $39,110 + 32% over $191,950 |
| 35% | $243,726 - $609,350 | $55,678 + 35% over $243,725 |
| 37% | Over $609,350 | $183,647 + 37% over $609,350 |
Married Filing Jointly
Marginal vs. Effective Tax Rate
Marginal Tax Rate
The rate you pay on your last dollar of income. This is your tax bracket.
Effective Tax Rate
Your total tax divided by total income. This is what you actually pay as a percentage.
Example: $75,000 Taxable Income
| Bracket | Income in Bracket | Tax |
|---|---|---|
| 10% | $11,600 | $1,160 |
| 12% | $35,550 | $4,266 |
| 22% | $27,850 | $6,127 |
| Total | $75,000 | $11,553 |
Marginal rate: 22%
Effective rate: 15.4% ($11,553 ÷ $75,000)
Don't Fear the Bracket
Standard vs. Itemized Deductions
| Filing Status | 2024 Standard Deduction |
|---|---|
| Single | $14,600 |
| Married Filing Jointly | $29,200 |
| Head of Household | $21,900 |
| Married Filing Separately | $14,600 |
Common Itemized Deductions
- State and local taxes (SALT) — up to $10,000
- Mortgage interest
- Charitable contributions
- Medical expenses over 7.5% of AGI
Which Should You Choose?
Payroll Taxes (FICA)
In addition to income tax, you pay payroll taxes on earned income:
| Tax | Employee Rate | 2024 Wage Limit |
|---|---|---|
| Social Security | 6.2% | $168,600 |
| Medicare | 1.45% | No limit |
| Additional Medicare | 0.9% | Over $200,000 |
Self-Employed?
Tax-Advantaged Strategies
Reduce Taxable Income
- Contribute to Traditional 401(k) — up to $23,000 (2024)
- Contribute to Traditional IRA — up to $7,000
- Use Health Savings Account (HSA) — triple tax advantage
- Flexible Spending Account (FSA) for dependent care
Tax Credits (Better Than Deductions!)
- Child Tax Credit — $2,000 per child
- Earned Income Tax Credit — up to $7,430
- American Opportunity Credit — up to $2,500 for education
- Saver's Credit — for retirement contributions
Credits vs. Deductions
Common Tax Mistakes
- Not adjusting withholding after life changes
- Missing deductions you qualify for
- Not contributing to employer 401(k) match
- Paying estimated taxes late (penalties!)
- Miscalculating self-employment taxes
- Not keeping records for deductions
Frequently Asked Questions
Q: When are taxes due?
A: April 15th for most taxpayers. Extensions give you until October 15th to file (not pay).
Q: What if I can't pay my tax bill?
A: File on time anyway to avoid failure-to-file penalties. Set up a payment plan with the IRS.
Q: How do I reduce my taxes legally?
A: Maximize retirement contributions, use HSAs, take all eligible deductions, contribute to 529 plans.
Q: Should I hire a tax professional?
A: Consider it if you're self-employed, have complex investments, or experienced major life changes.
Q: What's the difference between a refund and owing?
A: A refund means you overpaid throughout the year. Owing means you underpaid. Neither is 'winning.'
This calculator provides estimates based on federal tax law. State taxes, local taxes, and individual circumstances may vary. Consult a qualified tax professional for advice.