How to Calculate Marginal Tax


Your marginal tax is the amount of tax you will pay at the highest tax rate you are subject to paying. Many countries, including the United States, use a progressive income tax system so the more money you make, the higher the percentage of your income you will pay in taxes. Knowing how much you pay at the higher rate can help you determine whether making tax-deferred contributions would be beneficial to reducing your tax liabilities.

Things You'll Need

  • Tax bracket table
  • Calculator

Calculate your adjusted gross income. This is the amount of income on which you pay taxes. To obtain this figure, subtract any deductions, such as the standard deduction, from your total income.

Check your filing status, whether single, head of household, married filing jointly or married filing separately. If you are single but have dependents you claim, you can file as head of household. If you are married, you have the option to file a joint return with your spouse or to file separate returns.

Find your marginal tax rate using the tax bracket table. This is based on your adjusted gross income and filing status. For example, if in 2009 you were single and had an adjusted gross income of $35,000, your marginal tax rate was 15 percent.

Calculate how much of your income is taxed at the marginal tax rate. Simply subtract the lower limit of your marginal tax bracket from your adjusted gross income. For example, if in 2009 you were single and had an adjusted gross income of $35,000, the 15 percent tax bracket started at $33,950; thus, you had $1,050 taxed at your marginal rate.

Multiply your marginal tax rate by the amount of income you have in the marginal tax bracket. Thus, using the previous example, if you had $1,050 taxed at your marginal rate, your marginal tax was $157.50.

Tips & Warnings

  • Consider investing in a tax-deferred account like a traditional IRA or 401(k) to minimize the tax you pay in your marginal tax rate. For example, if you contributed $1,000 to a traditional IRA and your marginal tax rate was 25 percent, your take-home pay would only decrease by $750 instead of the full $1,000 because of the tax savings.

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