That will tell you how much taxable income you have.
Then you’ll review eligible credits and deductions and subtract those from your total income. You’ll start by adding up all your income. To figure out where you fit into the federal income tax brackets, you’ll need to factor in several items, such as eligible retirement plan contributions, allowable school expenses, the number of children you have, how much you contribute to your HSA, etc. How to Figure Out Your Federal Income Tax Bracket You don’t want to wait until you file your taxes to find out what you might owe or how you could have saved. The best way to find your actual federal tax rates is to speak with a licensed tax professional, use one of the best free tax software options or use an IRS calculator as a guide. In reality, you might be taxed for $45,000 in income based on 401(k) contributions, the standard deduction, education breaks, child tax credits, etc. That’s because you’ll likely be eligible for exemptions and deductions. So just because you grossed $60,000 doesn’t necessarily mean you’ll be taxed on all that income. To add another layer of complication to things, you have to figure out what your taxable income is. In this scenario, you only pay 22% on $12,849. Then you’ll pay 12% on all income you make from $11,601 to $47,150. Only once that bucket is filled do you move to the next where you’ll pay a higher federal income tax rate on each dollar you earn until that bucket fills.įor example, if your taxable income as a single filer is $60,000 in 2024, you’ll pay 10% on the first $11,600 in taxable income. As you fill the first bucket, you pay a smaller percentage of taxes.
Every dollar you earn within each bracket gets taxed at the rate that it falls within until you reach the next bracket.Ī good analogy for how this works is to imagine a series of buckets that get larger. Your income is broken into various levels, known as brackets.
Tax brackets are progressive, meaning income above a threshold is taxed at that higher rate. Your tax bracket does not mean that you’ll pay a large percentage of tax all income once you reach a new bracket.