The Internal Revenue Service publishes tax tables that show how much federal income tax you owe. Divided into columns, the tax tables are easy to read. Although your tax bracket determines what percentage of your income you must pay in taxes, you will pay a different tax rate for each taxable income range.
The range of a taxpayer’s income taxed at a particular percentage or tax rate is known as a tax bracket. The cutoff point for each income level listed on the tax rate schedule represents a different tax bracket. Your tax bracket takes in all your taxable income including interest income. Certain types of income such as dividend income or income from long-term capital gains are taxed at a special rate. Depending on fiscal policy, federal tax rates and the number of tax brackets are subject to change.
How much money you owe the government in taxes each year depends on the income tax rate you pay. While your taxable income is based on progressive tax rates rather than a single rate, the higher your taxable income the more complicated the tax computation. For the 2012 tax year, a taxpayer’s income is subject to tax rates of 10, 15, 25, 28, 33 and 35 percent. A lower rate applies to income up to a certain amount at which point a higher rate applies to the portion of income that falls within the next tax bracket. For instance, if you are married filing a joint return, you will pay a lower rate on the first $17,400 of your taxable income. You continue to pay a higher rate on the next income range until your taxable income for the year no longer exceeds subsequent income levels on the tax rate schedule.
Tax liability varies by filing status. Taxpayers who are unmarried and have no children must file as single while married taxpayers can file either a joint or separate return. If you are single and have a child, you may qualify to file as head of household or as a qualifying widow(er) with dependent child. The tax tables are based on tax rate schedules according to a taxpayer’s filing status; therefore, your filing status affects at what income level you move to a higher tax bracket. Taxpayers filing as single or those married and filing separately have lower income range cutoffs on the tax rate schedules.
Finding Your Tax
Reading the tax tables is a straightforward process. Once you figure your taxable income for the year, the tax table you use to find the amount of tax you owe depends on your filing status. Find your taxable income by reading down the left-hand column. The income column shows a range of two amounts "At least” and “But less than” on each line. After you locate the line that has the range where your taxable income falls, find your filing status at the top of the tax table. Read down the column to find your tax. The number you see is the dollar amount you owe the federal government.
Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.