Tax Brackets

Tax Brackets refer to the ranges of income that are taxed at specific rates, which are progressive in nature. As an individual’s income increases, the portions of their income that fall within these brackets are taxed at higher rates. This system is designed to ensure that those with higher incomes pay a larger percentage of their income in taxes.

For instance, in the United States for the tax year 2023, the Federal Income Tax brackets for a single filer are:

• 10% on income up to $11,000
• 12% on income over $11,000 to $44,725
• 22% on income over $44,725 to $95,375
• 24% on income over $95,375 to $182,100
• 32% on income over $182,100 to $231,250
• 35% on income over $231,250 to $578,125
• 37% on income over $578,125

For example, if an individual earns $50,000, their tax would be calculated as follows:

• 10% on the first $11,000 = $1,100
• 12% on income from $11,001 to $44,725 = $4,047 (12% of $33,725)
• 22% on income from $44,726 to $50,000 = $1,155.50 (22% of $5,275)

This totals to $6,302.50 in Federal Income Tax.

Tax brackets can vary by filing status (single, married filing jointly, etc.) and may be adjusted annually for inflation.