Tax Bracket Income Levels
Before 1913, the U.S. government did not possess the power to levy any taxes on a person's income. This changed with the ratification of the 16th amendment. The amendment reads "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
The Federal Income Tax is progressive. This means you will a pay the percentage of tax on the highest dollar amount you earn per earning bracket provided the dollar amount falls into that bracket. The dollar amounts are based on your filing status. There are four filing statuses from which to choose.
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Single Filer
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Information given is for the tax year 2010. If you are a single filer, the breakdown is this:
For the 10 percent bracket, you need to earn between zero dollars and $8,375.
For the 15 percent bracket, you need to earn between $8,375 and $34,000.
For the 25 percent bracket, you need to earn between $34,000 and $82,400.
For the 28 percent bracket, you need to earn between $82,400 and $171,850.
For the 33 percent bracket, you need to earn between $171,850 and $373,650.
Finally, for the 35 percent bracket, you need to earn more than $373,650.
Married Filing Jointly
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The tax bracket breakdown for couples that file jointly is this:
For the 10 percent bracket, the couple needs to earn between zero dollars and $16,750.
For the 15 percent bracket, the couple needs to earn between $16,750 and $68,000.
For the 25 percent bracket, the couple needs to earn between $68,000 and $137,300.
For the 28 percent bracket, the couple needs to earn between $137,300 and $209,250.
For the 33 percent bracket, the couple needs to earn between $209,250 and $373,650.
Finally, for the 35 percent bracket, the couple needs to earn more than $373,650. -
Married Filing Separately
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Married couples also have the option of filing separate tax returns. If they choose this option, the brackets breakdown this way for the individual filer:
For the 10 percent bracket, one needs to earn between zero dollars and $8,375.
For the 15 percent bracket, one needs to earn between $8,375 and $34,000.
For the 25 percent bracket, one needs to earn between $34,000 and $68,650.
For the 28 percent bracket, one needs to earn between $68,650 and $104,625.
For the 33 percent bracket, one needs to earn between $104,625 and $186,825.
Finally, for the 35 percent bracket, one needs to earn more than $186,825.
Head of Household
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The final option is to file as the head of household. That particular bracket is structured this way:
For the 10 percent bracket, you need to earn between zero dollars and $11,950.
For the 15 percent bracket, you need to earn between $11,950 and $45,550.
For the 25 percent bracket, you need to earn between $45,550 and $117,650.
For the 28 percent bracket, you need to earn between $117,650 and $190,550.
For the 33 percent bracket, you need to earn between $190,550 and $373,650.
Finally, for the 35 percent bracket, you need to earn more than $373,650.
Example
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You should know that the tax bracket you fall into isn't the actual amount of taxes you pay on your income. The bracket it just the amount where your highest dollar amount earned falls.
As an example, if a married couple filing jointly has a taxable income of exactly $90,000 after exemptions and deductions the tax breakdown will go like this:
($16,750-$0) x .10 = $1,675
($68,000-$16,750) x .15 = $7,687.50
($90,000-$68,000) x .25 = $5,500$1,675 + $7,687.50 + $5,500 = $14,862.50
As a total percentage of their income, this amount is only 16.5 percent.
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References
- Photo Credit tax forms image by Chad McDermott from Fotolia.com
