This means there are higher tax rates for higher income levels. These ranges are referred to as brackets. Income falling within a specific bracket is taxed at the rate for that bracket. The table below shows the tax brackets for the federal income tax, and it reflects the rates for the tax year, which are the taxes due in early These different categories are called filing statuses. Married persons can choose to file separately or jointly.
While it often makes sense to file jointly, filing separately may be the better choice in certain situations. This is because marginal tax rates only apply to income that falls within that specific bracket.
Of course, calculating how much you owe in taxes is not quite that simple. For starters, federal tax rates apply only to taxable income. This is different than your total income, otherwise known as gross income. Taxable income is always lower than gross income since the U. To calculate taxable income, you begin by making certain adjustments from gross income to arrive at adjusted gross income AGI.
Once you have calculated adjusted gross income, you can subtract any deductions for which you qualify either itemized or standard to arrive at taxable income. Note that there are no longer personal exemptions at the federal level.
Prior to , taxpayers could claim a personal exemption, which lowered taxable income. The tax plan signed in late eliminated the personal exemption, though. Deductions are somewhat more complicated. Many taxpayers claim the standard deduction, which varies depending on filing status, as shown in the table below.
Some taxpayers, however, may choose to itemize their deductions. This means subtracting certain eligible expenses and expenditures. Possible deductions include those for student loan interest payments, contributions to an IRA, moving expenses and health-insurance contributions for self-employed persons.
The most common itemized deductions also include:. If the standard deduction is larger than the sum of your itemized deductions as it is for many taxpayers , you'll receive the standard deduction. Once you have subtracted deductions from your adjusted gross income, you have your taxable income.
If your taxable income is zero, that means you do not owe any income tax. Unlike adjustments and deductions, which apply to your income, tax credits apply to your tax liability, which means the amount of tax that you owe. Tax credits are only awarded in certain circumstances, however. By contrast, nonrefundable tax credits can reduce your liability no lower than zero.
The list below describes the most common federal income tax credits. There are numerous other credits, including credits for the installation of energy-efficient equipment, a credit for foreign taxes paid and a credit for health insurance payments in some situations.
Whether or not you get a tax refund depends on the amount of taxes you paid during the year. This is because they were withheld from your paycheck. However, it also depends on your tax liability and whether or not you received any refundable tax credits. When you file your tax return, if the amount of taxes you owe your tax liability is less than the amount that was withheld from your paycheck during the course of the year, you will receive a refund for the difference.
This is the most common reason people receive a tax refund. Know the price of tax prep before you begin as part of our No Surprise Guarantee. Go to disclaimer for more details Tax calculator. Refund estimator. Smile generator. Calculate refund. How it works:. Brush up on the basics. Get letter details. Get tax help — however you need it.
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