Paying taxes is painful enough, so why does it have to be so hard to figure out my tax rate? We’ve all had this thought at one point in our lives (or maybe every tax season), and it doesn’t help that tax rates change often. But it all comes down to your filing status and your taxable income.
Federal Tax Filing Status
There are essentially four federal tax filing statuses available to you. They are single, head of household, married filing jointly, and married filing separately. A fifth status is qualifying surviving spouse, which typically falls into the same category as married filing jointly. Your filing status will not only determine your tax rate but also the amount of your standard deduction, among other tax-related things.
How to Calculate Taxable Income
In addition to your filing status, you need to calculate your taxable income. In simplified terms, you get to that number by taking your gross income and adjusting that number by subtracting certain allowable deductions, which will get you your adjusted gross income (AGI). From your AGI, you can take either the standard deduction or itemized deductions to figure out your taxable income. For a more in-depth explanation of AGI and taxable income, read our blog post Help! What’s My Adjusted Gross Income?
My Tax Rate Is . . .
Your tax rate is based on your income, and there are currently seven tax brackets for each filing status: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. At this point, it should be pretty simple, right? You look up your filing status, and which bracket you fit into, and you get the correlating tax rate. But this is taxes, and it’s never that simple.
Insert 2023 Tax Table?
Really, What Is My Tax Rate?
In essence, your tax rate is a combination of rates. So, for instance, if your filing status is single and your taxable income is $39,000, it looks like you fall into the 12% bracket. But because taxable income is given in ranges, you’ll actually pay 10% for the first $11,600 that you make and then 12% on your taxable income from $11,601 to $39,000. Is that confusing? Yes. Does it mean your tax rate is less than you thought it was? Well, yes.
If you’re still tearing your hair out over your tax rate, stop and give one of our tax preparers a call. We can help you figure it out.
**Please keep in mind: Tax laws, eligibility requirements, and rates change often, and these lists are not exhaustive. Always contact a tax preparer for the most up-to-date information.