Understanding Federal Income Tax
The US federal tax system uses seven progressive tax brackets for 2024–2025, ranging from 10% to 37%. Different income portions are taxed at different rates—your entire income is not taxed at your top bracket rate.
How Tax Brackets Work for Your Income
When you "move into" a higher tax bracket, only income above that threshold is taxed at the higher rate. For example: single filers earning $50,000 pay 10% on the first $11,600, then 12% on income from $11,601 to $47,150, and 22% only on the remainder. Your marginal rate (top bracket) is always higher than your effective rate (average rate paid).
Standard Deduction for 2024–2025
The standard deduction reduces taxable income before calculating your tax: $14,600 (single), $29,200 (married filing jointly), $21,900 (head of household). Most taxpayers use the standard deduction rather than itemizing. Consider itemizing only if mortgage interest, state/local taxes (capped at $10,000), charitable contributions, and medical expenses exceed your standard deduction.
Filing Status Impact on Your Tax
Single status applies to unmarried individuals. Married Filing Jointly offers wider brackets and higher deductions. Head of Household status (unmarried with dependents paying >50% of household costs) provides better rates than single filing.
Common Deductions and Credits
Above-the-line deductions: traditional IRA contributions ($6,500, or $7,500 if 50+), HSA contributions ($4,150 individual, $8,300 family), student loan interest ($2,500 max). Tax credits: Child Tax Credit ($2,000 per child under 17), Earned Income Tax Credit (refundable). Homeowners can deduct mortgage interest and property taxes when itemizing—use our mortgage payment calculator to estimate these housing costs.
For Self-Employed and Contractors
Self-employed individuals must make quarterly estimated tax payments covering both income tax and self-employment tax (Social Security and Medicare). Pay either 90% of current year's tax or 100% of last year's tax (110% if AGI exceeded $150,000) to avoid penalties.
State and Local Taxes
This calculator covers federal tax only. Nine states have no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming. State income tax rates range from flat systems (Illinois: 4.95%) to highly progressive (California: 13%+). Your combined federal, state, and local burden can range from 10% to 50%+ depending on income and location.