IRS tax brackets and tables

Federal income tax brackets and related tax items under the tax code provide for mandatory annual indexing based on inflation.

This is to prevent the condition known as bracket creep which refers to people being pushed into higher tax brackets due to income increases. Indexing up of brackets in inflationary times lowers tax bills by including more taxpayer incomes in lower brackets.

The indexing formula this year showed slightly higher inflation of just under 1.58 percent over last year and so most taxpayers will experience modest tax savings. For example, a single filer with taxable income of $50,000 should owe $62.50 less next year.

A married couple filing jointly with a taxable income of $100,000 should pay $125.50 less income taxes in 2015 than they will on the same income for 2014. Add to that the added tax savings by a higher 2015 standard deduction and personal exemption as well as increases in income ceilings on tax benefits like education credits and IRA contributions. Taken together, inflation-based tax savings for next tax year can become sizable. 2015 tax brackets, standard deductions and personal exemptions have moderately increased over 2014 levels. This helps taxpayers withdraw to lower tax brackets. The tax table for 2015 may be viewed and printed in its entirety.IRS-tax-brackets-and-tables-in-2015-b

Head of household: This is the most confusing of the tax brackets. Defined as an unmarried person who pays more than half of total household costs and lives with and supports family dependents for more than half of the year for more than 50 percent of the dependent care. If a married taxpayer divorces the taxpayer must live apart from the spouse for more than half of the year. The key term here is 50 percent. If you provide more than 50 percent of dependent care support for your tax exemptions while unmarried or living apart for more than 50 percent of the year and can prove it, you should be able to file as head of household and deduct a personal exemption that is roughly 50 percent more than a single taxpayer. It is smart to have supporting documentation for the IRS if they question your status.

Marginal tax rate: The tax system calculates taxes on income less the standard deduction and other exclusions earned during the tax year. This taxable income is applied on a graduating scale using stepped tax brackets. Taxes are calculated based on the portion of taxable income that falls into each tax bracket. The top tax bracket is called the marginal tax rate, but it is not the paid tax rate.

Tax calculation: The dollar figure in each tax bracket is the sum of taxes due from all lower brackets. The marginal tax rate percentage is multiplied by income exceeding the top figure in the bracket below. The two figures are added together to determine taxes owed. An example of a single taxpayer earning taxable income of $50,000. The marginal tax rate is 25 percent which applies only to taxable income over $37,450 ($12,550) or $3,137.50. The base amount of $5,156.25 is the sum of all the rates below.

[$9,225 * 10% = $922.50] [($37,450 – $9,225) * 15% = $4,233.75] Total $5,156.25
Adding the two together gives the total income tax. [$5,156.25 + $3,137.50 = $8,293.75
The income tax rate is $8,293.75 / $50,000 or 16.6 percent.