Tax Tips

tax bracket calcuation

Quick! What’s Your 2017 Tax Bracket?

April 26, 2017 : Gil Charney

What’s your 2017 tax bracket? 

If you have to think about this before answering, then you need to take a look at your recent tax return.

But before you do that, what’s the marginal tax rate, and why should you even care about any of these terms?

Fair question, but not knowing can lead you to poor tax decisions. You may end up paying more in taxes because the more income you earn, the higher is the tax rate that applies to that higher income. Paying more in taxes because you earn more is not necessarily a bad thing… but paying more taxes than you have to is!

Marginal Tax Rate Defined

Simply put, marginal tax rates are associated with income ranges (or brackets). You are subject to the marginal rate that applies to your taxable income (not salary or gross income).

For example, suppose you’re filing status is “Single” and your 2017 taxable income is $50,000. You would be in the 25% marginal tax bracket, which means that every additional dollar of income earned is taxed at 25% – until your taxable ordinary income is high enough to pierce the next bracket, which is 28%. The 25% bracket ends when your taxable income is $91,900 (see table below). The 28% bracket begins at $91,901. Your 91,900th dollar of taxable income is taxed at 25%, but the 91,901st dollar is taxed at 28%. So, in the 28% marginal bracket, you’ll keep $0.72 on instead of $0.75 that you would in the 25% bracket. Get it?

Marginal tax rates are established by law (not the IRS), and are set at 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. However, while the rates themselves don’t change, the ranges of income (brackets) that are associated with each rate vary according to filing status.

So, using the above example, $50,000 in taxable income falls within the 25% tax bracket for a single taxpayer, but for a married couple filing jointly (MFJ), this income falls in the 15% tax bracket. Clearly, some filing statuses are better than others when it comes to marginal tax rates. Years ago, some people would get married on the last day of the year – which determines whether they’re considered married for the full year – to qualify for the better MFJ tax rate, but then have the marriage annulled in January!

Where Can You Find Your Marginal Tax Rate on Your Tax Return?

Now you know what a marginal tax rate is and you just grabbed your return to find your rate, right? Unfortunately, your marginal rate is not shown directly on your tax return, but you need the return to determine what the rate is.

First, make sure you know what your filing status is, as shown by the box that is checked next to lines one through five on Forms 1040 or 1040A. If you file Form 1040EZ, your filing status is either MFJ or Single; there are no checked boxes.

Then, find your taxable income on your tax return (Form 1040 line 43, Form 1040A line 27, or Form 1040EZ line 6). Visit the IRS website and look for the tax tables in the Tax Guide Pub. 17 or Form 1040 instructions.

The 2017 tax tables for Single and Married Filing Jointly filing statuses are shown below. Use the appropriate Tax Rate schedules for your filing status as shown on page 267 in Pub. 17, and see where your taxable income falls in the schedule.

So, if you’re that single taxpayer with taxable income of $50,000, your 25% marginal tax rate is shown here:

2017 tax rate

Source: The Tax Institute

Now that you know what your marginal tax rate is, see if you can find ways to lower it in 2017. Find more tax tips here.

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Gil Charney

Gil Charney

H&R Block

Gil is the Director of Tax Law and Policy Analysis for The Tax Institute at H&R Block.

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