Federal income tax rates progressively increase as income increases. Instead of just one, flat rate that applies to all income, a person's income will fall into one or more tax rates depending on their income and deductions. For example, a single person with taxable income of $50,000 falls into the 25% tax bracket. (See the single tax rates below.) This "25% tax bracket" means that the person's income from zero to $8,700 is taxed at 10%, and income from $8,700 to $35,350 is taxed at 15%, and finally income from $35,350 to $50,000 is taxed at 25%. The 25% tax rate is this person's marginal tax rate, the tax rate that applies to the last dollars of income earned during the year.
2012 Tax Rates
For 2012, there will be six tax rates of:- 10%,
- 15%,
- 25%,
- 28%,
- 33%, and
- 35%.
Single Filing Status
[Tax Rate Schedule X, Internal Revenue Code section 1(c)]- 10% on taxable income from $0 to $8,700, plus
- 15% on taxable income over $8,700 to $35,350, plus
- 25% on taxable income over $35,350 to $85,650, plus
- 28% on taxable income over $85,650 to $178,650, plus
- 33% on taxable income over $178,650 to $388,350, plus
- 35% on taxable income over $388,350.
Married Filing Jointly or Qualifying Widow(er) Filing Status
[Tax Rate Schedule Y-1, Internal Revenue Code section 1(a)]- 10% on taxable income from $0 to $17,400, plus
- 15% on taxable income over $17,400 to $70,700, plus
- 25% on taxable income over $70,700 to $142,700, plus
- 28% on taxable income over $142,700 to $217,450, plus
- 33% on taxable income over $217,450 to $388,350, plus
- 35% on taxable income over $388,350.
Married Filing Separately Filing Status
[Tax Rate Schedule Y-2, Internal Revenue Code section 1(d)]- 10% on taxable income from $0 to $8,700, plus
- 15% on taxable income over $8,700 to $35,350, plus
- 25% on taxable income over $35,350 to $71,350, plus
- 28% on taxable income over $71,350 to $108,725, plus
- 33% on taxable income over $108,725 to $194,175, plus
- 35% on taxable income over $194,175.
Head of Household Filing Status
[Tax Rate Schedule Z, Internal Revenue Code section 1(b)]- 10% on taxable income from $0 to $12,400, plus
- 15% on taxable income over $12,400 to $47,350, plus
- 25% on taxable income over $47,350 to $122,300, plus
- 28% on taxable income over $122,300 to $198,050, plus
- 33% on taxable income over $198,050 to $388,350, plus
- 35% on taxable income over $388,350.
Note: These tax rates are provided for tax planning purposes. To compute your actual income tax, please see the 2012 Instructions for Form 1040 and the 2012 Tax Tables.
How to Use the Tax Rates
Individuals can use the tax rate brackets in a number of ways to calculate the tax cost of additional income during the year or to calculate the tax savings of incurring tax-deductible expenses.You can use these tax rates to figure out how much federal income tax you will pay on additional income such as tips, bonuses, and interest. For a taxpayer in the 25% tax bracket, for example, extra income will be taxed at the 25% rate until the taxpayer's income reaches the next tax bracket of 28%. An additional dollar of income that falls within the 25% tax bracket will increase federal income tax by 25 cents.
Alternatively, you can use these tax rates to figure out how much federal income tax you will save by increasing your deductions. A taxpayer in the 28% tax bracket, for example, will reduce federal income tax by 28 cents for every dollar spent on a tax-deductible expense, such as mortgage interest or charity.
Be aware that marginal tax rates interact with other tax rates, including the alternative minimum tax, Social Security tax, and Medicare tax rates. In particular, the alternative minimum tax can push income into a higher tax rate or eliminate the tax savings of deductions.
Source: the official tax brackets for 2012 were published by the Internal Revenue Service in Revenue Procedure 2011-52 (21 pages, pdf).
