If you want to know which tax rate you’re responsible for the tax year, you should know about some terms first like taxable income and nontaxable income. Taxable income is the amount of money ( earned or unearned ) that the Federal Government labels as ‘ tax liability creating ‘.
Earned and Unearned Income
Your wages, fees and even the tips you receive are recorded by the IRS as ‘ earned income ‘. The unearned income is the amount you get without working for it. The followings are among these unearned income types.
- Unemployment fees
- Canceled Debts
- Lottery Earnings
- Severance Pay
- Rental Income of Personal Property
What is Nontaxable Income?
Some of the incomes don’t create a tax liability. They are generally not worth listing but sometimes you may be asked to fill these items on your forms in some situations. Here are some examples of nontaxable income :
- Welfare income
- Child Support Benefits
- Cash gifts
- Disability, illness, injury damages
How to Calculate My Taxable Income?
Every taxpayer tries to make an accurate calculation of their taxables to make the best deduction. Follow the steps below to calculate your taxable income, you will need a good calculator for this job because you will be dealing with some annoying numbers :
- You need to calculate your total taxable income of the tax year. You simply figure out both your earned and unearned income
- You need to calculate your AGI ( Adjusted Gross Income )
- You need to make subtraction of any itemized or standard tax deductions from your AGI.
- Subtract all your exemptions including the dependent exemption
- After you’ve done all the subtraction job of exemption and deduction, the amount get is your taxable income
Brackets for Taxable Income
After you’ve figured out your taxable income, you simply check the brackets list below for the right one for you :
|Tax Rate ( % )||Single ( $ )||Married Filing Jointly ( $ )||Head of Household ( $ )|
|10||0 – 9,875||0 – 19,750||0 – 14,100|
|12||9,876 – 40,125||19,751 – 80,250||14,101 – 53,700|
|22||40,126 – 85,525||80,251 – 171,050||53,701 – 85,500|
|24||85,526 – 163,300||171,051 – 326,600||85,501 – 163,300|
|32||163,301 – 207,350||326,601 – 414,700||163,301 – 207,350|
|35||207,351 – 518,400||414,701 – 622,050||207,351 – 518,400|
|37||more than 518,400||more than 622,050||more than 518,400|