Tellernote

Tellernote

×

TAXES

2022-2023 tax brackets and federal income tax rates

cate02

Written by Cate Deventer

amy

Edited by Amy Sims

cropped-TellerNote-Favicon.png

The Tellernote promise

At Tellernote we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money.

There are seven tax brackets for most ordinary income for the 2022 tax year: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent.

Your tax bracket depends on your taxable income and your filing status: single, married filing jointly or qualifying widow(er), married filing separately and head of household. Generally, as you move up the pay scale, you also move up the tax scale.

2022 tax brackets (for taxes due April 2023 or October 2023 with an extension)

Tax rateSingleHead of householdMarried filing jointly or qualifying widowMarried filing separately
10% $0 to $10,275$0 to $14,650$0 to $20,550$0 to $10,275
12%$10,276 to $41,775$14,651 to $55,900$20,551 to $83,550$10,276 to $41,775
22%$41,776 to $89,075$55,901 to $89,050$83,551 to $178,150$41,776 to $89,075
24%$89,076 to $170,050$89,051 to $170,050$178,151 to $340,100$89,076 to $170,050
32% $170,051 to $215,950$170,051 to $215,950$340,101 to $431,900$170,051 to $215,950
35% $215,951 to $539,900$215,951 to $539,900$431,901 to $647,850$215,951 to $323,925
37%$539,901 or more$539,901 or more$647,851 or more$323,926 or more

Source: IRS

The IRS started accepting taxpayers’ returns for this year’s tax season back in January. Most Americans have until April 18 to file, though they can request a six-month extension to Oct. 16.

2023 tax brackets (for taxes due April 2024 or October 2024 with an extension)

The IRS has also announced new tax brackets for the 2023 tax year, for taxes you’ll file in April 2024, or October 2024 if you file an extension. Brackets are adjusted each year for inflation. There are seven tax brackets for most ordinary income for the 2023 tax year: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent.

Tax rateSingleHead of householdMarried filing jointly or qualifying widowMarried filing separately
10% $0 to $11,000$0 to $15,700$0 to $22,000$0 to $11,000
12%$11,001 to $44,725$15,701 to $59,850$22,001 to $89,450$11,001 to $44,725
22%$44,726 to $95,375$59,851 to $95,350$89,451 to $190,750$44,726 to $95,375
24%$95,376 to $182,100$95,351 to $182,100$190,751 to $364,200$95,376 to $182,100
32% $182,101 to $231,250$182,101 to $231,250$364,201 to $462,500$182,101 to $231,250
35% $231,251 to $578,125$231,251 to $578,100$462,501 to $693,750$231,251 to $346,875
37%$578,126 or more$578,101 or more$693,751 or more$346,876 or more

Source: IRS

How federal tax brackets work? Calculate your effective tax rate

Tax brackets are not as intuitive as they seem because most taxpayers have to look at more than one bracket to know their effective tax rate.

Instead of looking at what tax bracket you fall in based on your income, determine how many individual tax brackets you overlap based on your gross income.

Figuring that out is easier in practice:

  • Example one: Say you’re a single individual who earned $40,000 of taxable income in the 2022 tax year. Technically, you’d be aligned in the 12 percent tax bracket, but your income wouldn’t be levied a 12 percent rate across the board. Instead, you would follow the tax bracket up on the scale, paying 10 percent on the first $10,275 of your income and then 12 percent on the next chunk of your income between $10,276 and $41,775. Because you don’t make above $41,775, none of your income would be hit at the 22 percent rate.

That often amounts into Americans being charged a rate that’s smaller than their individual federal income tax bracket, known as their effective tax rate.

 
  • Example two: Say you’re a single individual in 2022 who earned $70,000 of taxable income. You would pay 10 percent on the first $10,275 of your earnings ($1,027.50); then 12 percent on the chunk of earnings from $10,276 and $41,775 ($3,780), then 22 percent on the remaining income ($6,209.50).
  • Your total tax bill would be $11,017. Divide that by your earnings of $70,000 and you get an effective tax rate of roughly 16 percent, which is lower than the 22 percent bracket you’re in.

What is a marginal tax rate?

Another way of describing the U.S. tax system is by saying that most Americans are charged a marginal tax rate. That’s because as income rises, it’s taxed at a higher rate. In other words, the last dollar that an American earns is taxed more than the first dollar. This is what’s known as a progressive tax system.

The technical definition of a marginal tax rate would be the rate that each individual taxpayer pays on their additional dollars of income.

How to get into a lower tax bracket

Americans have two main ways to get into a lower tax bracket: tax credits and tax deductions.

Tax credits

Tax credits are a dollar-for-dollar reduction in your income tax bill. If you have a $2,000 tax bill but are eligible for $500 in tax credits, your bill drops to $1,500. Tax credits can save you more in taxes than deductions, and Americans can qualify for a variety of different credits.

The federal government gives tax credits for the cost of buying solar panels for your house and to offset the cost of adopting a child. Americans can also use education tax credits, tax credits for the cost of child care and dependent care and tax credits for having children, to name a few. Many states also offer tax credits.

Tax deductions

While tax credits reduce your actual tax bill, tax deductions reduce the amount of your income that is taxable. If you have enough deductions to exceed the standard deduction for your filing status, you can itemize those expenses to lower your taxable income. For example, if your medical expenses exceed 7.5 percent of your adjusted gross income in 2022, you can claim those and lower your taxable income.

ON THIS PAGE