Federal Income Tax Calculator

What is Federal Income Tax?

Federal Income Tax is a tax imposed by the United States federal government on the annual earnings of individuals, corporations, trusts, and other legal entities. It's a progressive tax, meaning that the tax rate increases as the taxable amount increases. The tax is calculated based on filing status and taxable income.

The Federal Income Tax Formula

The general formula for calculating federal income tax is:

\[Tax = \sum_{i=1}^{n} (Income_{i} \times Rate_{i})\]

Where:

• \(Income_{i}\) = Taxable income in bracket i
• \(Rate_{i}\) = Tax rate for bracket i
• n = Number of applicable tax brackets

Step-by-Step Tax Calculation

1. Determine the individual's filing status (Single, Married Filing Joint, Married Filing Separate, or Head of Household).
2. Identify the applicable tax brackets and rates based on filing status.
3. Calculate the tax for each bracket where income falls: \[Tax_{bracket} = (Income_{in bracket} - Lower threshold) \times Rate_{bracket}\]
4. Sum up the tax from all applicable brackets to get the total tax.
5. Calculate the effective tax rate: \[Effective Rate = \frac{Total Tax}{Total Income} \times 100\%\]

Example Calculation

Let's calculate the federal income tax for a single filer with an annual income of $75,000:

1. $0 - $9,950: \(9,950 \times 10\% = $995\)
2. $9,951 - $40,525: \((40,525 - 9,950) \times 12\% = $3,669\)
3. $40,526 - $75,000: \((75,000 - 40,525) \times 22\% = $7,584.50\)
4. Total Tax: \($995 + $3,669 + $7,584.50 = $12,248.50\)
5. Effective Tax Rate: \(\frac{12,248.50}{75,000} \times 100\% = 16.33\%\)

Visual Representation

The blue portion of the bar represents the effective tax rate (16.33%) for the given income.