- What is the marginal tax rate?
- The marginal tax rate is the percentage of tax that is applied to your income for each tax bracket for which you qualify. In other words, for each dollar that you go over each bracket, the marginal tax rate works out how much you need to pay. The marginal tax rate is usually worked out on a federal, state and local basis and includes taxes paid by the self-employed and federal payroll.
- The marginal tax rate is described as a progressive tax. This means that it increases, the more you earn. If you earn a small amount each year, you will owe the least amount of marginal tax. However everyone pays a basic rate, and the additional tax is only applied to the amount that you go over each threshold – not on the entire amount. So if you earn just over the threshold at any level, it will not mean that you are losing money – just paying the tax on that increase.
- Why do I need to know my marginal tax rate?
- It is important to know your marginal tax rate, as it will allow you to work out how your bonus or pay rise might affect you. You may find that other income streams might work out better, such as a share allowance or additional expenses allowances. Our Marginal Tax rate Calculator will let you see in an instant how your income bracket affects the amount of tax you pay – a handy tool in your financial planning.
- The marginal tax rates are set at 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. You move through these rates as your income increases. The brackets you move into also depend on many factors including if you are married and filing jointly or if you are a qualifying widow. This will mean you fall into a better bracket for your requirements. You may also qualify for some exemptions and deductions such as dependents (children.)
- When you come to fill in your tax return, you will have a choice of forms you can use. One of these is the basic 1040EZ form , which is ideal for basic tax payers on relatively low incomes. Other 1040 forms may apply to your circumstances. These forms can be accompanied by tax credit options that will further reduce your tax burden. If you can claim enough exemptions and credits, you may find that you fall into a lower marginal tax bracket and therefore pay less tax overall.
- What are the tax brackets for 2017?
- Taxpayers will fall into one of seven marginal tax brackets depending on their taxable income. The table below displays the tax brackets according to filing status, which the IRS adjusts for inflation each year. The latest adjustments are reflected in the table below for 2017 filings, for taxes due on April 17th, 2018.
Status: Head of household
Up to $9,325
Up to $13,350
$9,325 to $37,950
$13,351 to $50,800
$37,951 to $91,900
$50,801 to $131,200
$91,901 to $191,650
$131,201 to $212,500
$191,651 to $416,700
$212,501 to $416,700
$416,701 to $418,400
$416,701 to $444, 550
$418,401 and up
$444,551 and up
Status: Married jointly or widow
Filing: Married filing separately
Up to $18,650
Up to $9,325
$18,651 to $75,900
$9,326 to $37,950
$75,901 to $153,100
$37,951 to $76,550
$153,101 to $233, 350
$76,551 to $116,675
$233,351 to $416,700
$116,676 to $208,350
$416,701 to $470,700
$208,351 to $235,350
470.701 and up
$235,351 and up
- How to use the Marginal Tax Rate Calculator
- Our calculator is designed to help you to work out how much tax you will need to pay at each level of income you earn. It can help you decide whether to take a new job, accept a pay rise or try other forms of revenue instead, such as additional retirement funding. The calculator is easy to use and requires just a few details to get you started.
- The first details needed are your regarding your filing information. These include whether you are married or single and if you are filing as a couple. You are also asked if you have children or other dependents. You will need to know your full income for the year including any wages, salary, and tips. Deductions are removed at this point as well.
- There are three reports generated from the information you have given in the first part of the calculator. The first is a simple bar graph showing the level of income at each bracket and the tax rate you are charged. Here you can see that the first portion of income is charged at the lowest rate of 12.19%, while the rest is charged at 25%.
- The second report shows the marginal tax rate, the average tax rate, and income tax bracket that you fall into. You can see that the marginal tax bracket is 25%, but the average is much lower at 12%. This is because the marginal tax rate is only charged on the amount that you go over the threshold, not on the full amount.
- The final report is a simple summary of the information you have supplied. Here you can see that you have correctly filled out the information and see what deductions have been applied to your calculation. This is ideal for seeing how much tax you will need to pay during the year and ensuring that you have a scheme set up to pay the required amount during the tax year. You may also decide to work with an accountant to reduce this tax burden by taking advantage of other tax reduction schemes.
- The marginal tax rate calculator is a simple tool that is essential to allow you to plan for tax burden throughout the year. You can use it to decide on your new job, to see if a pay rise is worth your while or solely to know how much you need to save for taxes every month.