An income tax is a tax that is imposed by the federal government and some state governments on the income earned by individuals and businesses. In the United States, the federal tax is based on a progressive tax system, which means that people who earn more money pay a higher percentage of their income in taxes.
For the tax year 2022 (taxes due in 2023), the federal tax rates range from 10% to 37%, depending on your earnings. The tax brackets for the 2022 tax year will be elaborated as follows.
Nitty Gritty
- 10%: income up to $10,275 for individuals ($20,550 for married filing jointly)
- 12%: income from $10,276 to $42,950 for individuals ($20,551 to $85,900 for married filing jointly)
- 22%: income from $42,951 to $87,850 for individuals ($85,901 to $175,700 for married filing jointly)
- 24%: income from $87,851 to $183,250 for individuals ($175,701 to $366,500 for married filing jointly)
- 32%: income from $183,251 to $219,600 for individuals ($366,501 to $439,200 for married filing jointly)
- 35%: income from $219,601 to $452,400 for individuals ($439,201 to $904,800 for married filing jointly)
- 37%: income over $452,400 for individuals ($904,801 for married filing jointly)
Comprehending Income Tax Implementation
The Federal income tax is a bit confusing for the general public. Let’s make it easy for you to understand by taking a practical example. Suppose, if you’re a single person earning $60,000 per year, you would fall into the 22% tax bracket.
That means you would pay 10% on the first $10,275 of your income, 12% on the income between $10,276 and $42,950, and 22% on the income between $42,951 and $60,000. Your total tax bill for the year would be $9,069.25.
Is The Income Tax Rate the Same for All States?
No, the income tax may vary from state to state as the state autonomy is also exercised to implement taxes. Therefore, it’s important to note that these tax rates and brackets can change from year to year, so it’s always a good idea to check the latest information.
In addition to federal tax, some states also impose their own tax. The rates and rules vary by state, so it’s important to check the specific rules for your state. For example, in California, the state tax rates range from 1% to 13.3%, depending on your income.
Do Companies Deduct Tax from Paychecks?
If you’re an employee, your employer will withhold a portion of your paycheck for federal income tax and, if applicable, state tax. This is done using a system called “payroll withholding.” Your employer will use the information you provide on your Form W-4 to determine how much to withhold from your paycheck.
It’s important to note that this tax is just one type of tax that you may be subject to. Apart from that, other types of taxes that you may need to pay include Social Security and Medicare taxes (if you’re an employee), self-employment taxes (if you’re self-employed), and sales taxes (if you make purchases).
Final Remarks
In summary, income tax is a tax that is imposed on the income earned by individuals and businesses. The federal tax rates range from 10% to 37%, depending on your income, and some states also impose their own tax. It’s important to understand your tax obligations. You should seek help from a tax professional or use reputable tax preparation software. It will ensure that you are accurately reporting and paying your taxes.