When determining an individual’s taxes owed, the IRS starts by identifying the individual’s taxable income. This is their net income for the year minus certain nontaxable items (e.g., income spent on charitable donations).
The basic formula for taxation is (income x tax rate = taxes due). Once the taxable income has been calculated, the IRS will apply certain tax rates to find the taxes owed.
Clearly, according to this formula, taxpayers with higher income levels or higher tax rates will ultimately owe more taxes barring other considerations. The question this article discusses is how the tax rate portion of the formula is determined; when is the tax rate higher and when is it lower?
How Tax Rates Work
There are seven tax rates that can apply to individual income taxes, typically identified as: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
There is a common misconception amongst Americans that each individual has a single, flat rate used for all of their income, which changes as they become wealthier. For example, those below the poverty level pay 10% on all of their income and the wealthy pay 37% on all of their income. . . right?
Not so fast, the United States actually applies the same tax rates to all individuals in a stair-step type pattern. Essentially, every taxpayer will pay 10% on the first portion of their taxable income, 12% on the next portion of their taxable income, 22% on the next portion of their taxable income, and so on.
For example, in 2023, a single individual would have paid 10% on the first $11,000 in taxable income that they earned. They would then pay 12% on the next $33,725 that they earned.
| Tax Rate | Taxable Income |
|---|---|
| 10% | $0 to $11,000 |
| 12% | $11,001 to $44,725 |
| 22% | $44,726 to $95,375 |
| 24% | $95,376 to $182,100 |
| 32% | $182,101 to $231,250 |
| 35% | $231,251 to $578,125 |
| 37% | $578,126 or more |
Each of these segments of income that are taxed differently are known as a tax bracket. For example, an individual who earns $30,000 will find themselves in two tax brackets (10% and 12%). If you hear someone described as living in a “high tax bracket”, it usually means that their income is high enough that they reach those top brackets on their income and are paying substantial taxes (35% – 37%) on at least part of their income.
Mary earned $20,000 in taxable income in 2023. Based on the table above, she would pay 10% on the first $11,000 for $1,100. She would then pay 12% on the next $9,000 that she earned for $1,080 in taxes. Her total taxes owed is $2,180.
Note that these tax brackets change year to year and there are different brackets for each filing status For example, in 2023, you paid 10% on the first $11,000 you earned in taxable income. In 2024, that changed to 10% on the first $11,600 you earned in taxable income.
Every year, taxpayers will try to estimate how much of their salaries they should withhold for tax purposes. Few taxpayers however want to spend the time needed to work with the different tax breaks. This is why the tax preparer may give you something known as the effective rate.
The effective rate is calculated as (total taxes owed divided by your taxable income). Essentially, it is an average tax rate. This won’t typically calculate your exact taxes owed, but it gets pretty closely.
Below you can find the tax rate brackets for 2024.
Single (S)
| Tax Rate | Single (2024) |
|---|---|
| 10% | $0 – $11,600 10% of Taxable Income |
| 12% | $11,601 – $47,150 $1,160.00 + (12% * Income over $11,600) |
| 22% | $47,151 – $100,525 $5,426.00 + (22% * Income over $47,150) |
| 24% | $100,525 – $191,950 $17,168.50 + (24% * Income over $100,525) |
| 32% | $191,951 – $243,725 $39,110.50 + (32% * Income over $191,950) |
| 35% | $243,726 – $609,350 $55,678.50 + (35% * Income over $243,725) |
| 37% | $609,351+ $183,650.40 + (37% * Income over $609,350) |
Married Filing Jointly and Qualifying Widower (MFJ | QW)
For fairness, tax rates for married couples are generally twice that of single individuals.
| Tax Rate | Married Filing Jointly (2024) |
|---|---|
| 10% | $0 – $23,200 10% of Taxable Income |
| 12% | $23,201- $94,300 $2,030.00 + (12% * Income over $23,200) |
| 22% | $94,301 – $201,050 $10,852.00 + (22% * Income over $94,300) |
| 24% | $201,051 – $383,900 $34,337.00 + (24% * Income over $201,050) |
| 32% | $383,901 – $487,450 $78,221.00 + (32% * Income over $383,900) |
| 35% | $487,451 – $731,200 $111,357.00 + (35% * Income over $487,450) |
| 37% | $731,201+ $196,669.50 + (37% * Income over $731,200) |
Married Filing Separately (MFS)
Married Filing Separately is usually similar to the Single tax brackets until you reach the 35% – 37% brackets.
| Tax Rate | Married Filing Separately (2024) |
|---|---|
| 10% | $0 – $11,600 10% of Taxable Income |
| 12% | $11,601 – $47,150 $1,160.00 + (12% * Income over $11,600) |
| 22% | $47,151 – $100,525 $5,426.00 + (22% * Income over $47,150) |
| 24% | $100,525 – $191,950 $17,168.50 + (24% * Income over $100,525) |
| 32% | $191,951 – $243,725 $39,110.50 + (32% * Income over $191,950) |
| 35% | $243,726 – $365,600 $55,678.50 + (35% * Income over $243,725) |
| 37% | $365,600+ $98,334.75 + (37% * Income over $609,350) |
Head of Household (HoH)
| Tax Rate | Head of Household (2024) |
|---|---|
| 10% | $0 – $16,550 10% of Taxable Income |
| 12% | $16,551 – $63,100 $1,655.00 + (12% * Income over $16,550) |
| 22% | $63,101 – $100,500 $7,241.00 + (22% * Income over $63,100) |
| 24% | $100,501 – $191,950 $15,469.00 + (24% * Income over $100,500) |
| 32% | $191,951 – $243,700 $37,417.00 + (32% * Income over $191,950) |
| 35% | $243,701 – $609,350 $53,977.00 + (35% * Income over $243,700) |
| 37% | $609,350 $181,954.50 + (37% * Income over $609,350) |
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