What Is A Tax Bracket?
A tax bracket is a range of incomes that are taxed at a set rate based on your taxable income.
There are seven tax brackets. The lowest bracket being subject to a 10% marginal tax rate and the highest being subject to 37% marginal tax rate.
Your marginal tax rate will be dependent upon your taxable income within the brackets.
How Do You Know What Tax Bracket You're In?
For tax year 2024,
If you’re a single filer who earned $60,000 after you take all the necessary exemptions, adjustments, and deductions, you are in the 22% tax bracket, though your effective tax rate will be much lower.
The first $11,600 in earnings will be taxed at 10%.
$11,601 to $47,150 will be taxed at 12%.
$47,151 to $60,000 will be taxed at 22%.
If you are married filing jointly,
The first $23,200 in earnings will be taxed 10%.
$23,201 to $94,300 will be taxed at 12%.
The income you earned from your job is considered ordinary or gross income.
However as mentioned above, there may be exemptions, adjustments, and deductions to your gross income.
Therefore, you are NOT taxed on your gross income. You are taxed on your adjusted gross income, which is your gross income minus those exemptions, adjustments, and deductions.
When you know your tax bracket, you can easily calculate how valuable different tax deductions are for you. If you are in the 22% tax bracket, a $1,000 deduction will reduce your tax liability by $220.
IMPORTANT NOTE
Not all of your income is taxed based on these brackets.
If you have long-term capital gains and qualified dividends, you will be taxed at 0%, 15%, or 20% depending on your income.
If you have a short-term gain, it will be taxed as ordinary income using your marginal tax rate.
Tax Brackets May Be Different From the Previous Tax Year
Each new tax year the income thresholds for each tax bracket are updated.
The seven tax bracket percentages have not been changed since tax year 2018.
The current tax brackets are: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
The income thresholds for these brackets kick are below in the charts:
2023 Rates
Rates | Threshold for Single | Threshold for MJF |
10% | $0 – $11,000 | $0 – $22,000 |
12% | $11,001 – $44,725 | $22,001 – $89,450 |
22% | $44,726 – $95,375 | $89,451 – $190,750 |
24% | $95,376 – $182,100 | $190,751 – $364,200 |
32% | $182,101 – $231,250 | $364,201 – $462,500 |
35% | $231,251 – $578,125 | $462,501 – $693,750 |
37% | $578,126 and over | $693,751 and over |
2024 Rates
Rates | Threshold for Single | Threshold for MJF |
10% | $0 to $11,600 | $0 to $23,200 |
12% | $11,601 to $47,150 | $23,201 to $94,300 |
22% | $47,151 to $100,525 | $94,301 to $201,050 |
24% | $100,526 to $191,950 | $201,051 to $383,900 |
32% | $191,951 to $243,725 | $383,901 to $487,450 |
35% | $243,726 to $609,350 | $487,451 to $731,200 |
37% | $609,351 and over | $731,201 and over |
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