American Income Tax Brackets
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Table of Contents
How is the American income tax bracket structured?
The American income tax bracket system determines how much tax you owe based on your income level. It uses a progressive structure, meaning higher portions of income are taxed at higher rates.
What are income tax brackets?
Income tax brackets are part of the US tax system and determine the rate at which your income is taxed. They are structured progressively, meaning that as your income increases, portions of it are taxed at higher rates.
Each bracket applies to a specific range of income, and only the income within that range is taxed at that bracket’s rate. For example, if part of your income falls into a higher bracket, only that portion is taxed at the higher rate, not your entire income.
What are the current US federal income tax brackets (2024-2025)?
Filing Status |
10% Bracket |
12% Bracket |
22% Bracket |
24% Bracket |
32% Bracket |
35% Bracket |
37% Bracket |
Single Filers |
Up to US$11,600 |
US$11,601 to US$47,150 |
US$47,151 to US$100,525 |
US$100,526 to US$191,950 |
US$191,951 to US$416,700 |
US$416,701 to US$609,350 |
Over US$609,350 |
Married Filing Jointly |
Up to US$23,200 |
US$23,201 to US$94,300 |
US$94,301 to US$201,050 |
US$201,051 to US$383,900 |
US$383,901 to US$770,800 |
US$770,801 to US$731,200 |
Over US$731,200 |
Heads of Household |
Up to US$17,000 |
US$17,001 to US$68,000 |
US$68,001 to US$100,525 |
US$100,526 to US$191,950 |
US$191,951 to US$416,700 |
US$416,701 to US$609,350 |
Over US$609,350 |
How are state taxes related to federal tax brackets?
State taxes are separate from federal tax brackets. States can set their own tax rules, which might include flat rates, progressive brackets, or no income tax at all.
For instance, California has a progressive state tax system like the federal one, while states like Texas and Florida don’t tax income at all. US expats may also need to check their state’s residency rules to see if they still owe state taxes.
How do tax brackets affect American expats?
Tax brackets determine how much income is taxed, but expats can use deductions and credits to lower what they owe.
For example, the Foreign Earned Income Exclusion (FEIE) lets expats exclude a set amount of their foreign income from US taxes. The Foreign Tax Credit allows them to reduce US taxes by the amount they’ve paid in another country.
How often do income tax brackets change?
Income tax brackets are usually adjusted every year for inflation.
However, there may be larger changes to tax brackets happen when new laws are passed. For example, the Tax Cuts and Jobs Act (TCJA) of 2017 made big changes to the tax brackets.
Are capital gains taxed using the same brackets as regular income?
No, capital gains are taxed differently from regular income. They are categorized as either short-term or long-term:
- Short-term capital gains: These apply to investments held for one year or less and are taxed at the same rates as your regular income.
- Long-term capital gains: These apply to investments held for more than one year and are taxed at lower rates of 0%, 15%, or 20%, depending on your income.
What happens if my income falls into two brackets?
If your income spans multiple brackets, each portion of your income is taxed at the corresponding bracket’s rate. This is the basis of the progressive tax system.
For instance, if you earn US$50,000 as a single filer, part of your income will be taxed at 10%, another portion at 12%, and the rest at 22%. Only the income within each bracket is taxed at its specific rate.
How can I lower my taxable income to stay in a lower tax bracket?
Here are some ways to reduce your taxable income and potentially stay in a lower bracket:
- Contribute to retirement accounts: Contributions to traditional IRAs or 401(k)s lower your taxable income.
- Use deductions: Claim deductions like mortgage interest, student loan interest, or charitable donations.
- Apply tax credits: Tax credits, such as the Child Tax Credit, reduce the actual taxes you owe.
- Use the Foreign Earned Income Exclusion (FEIE): If you’re an expat, exclude a portion of your foreign income from US taxes.
Start reducing your taxable income today.
We’ll help you maximize your tax benefits.
Does the US have a flat tax system?
No, the US uses a progressive tax system, where higher income levels are taxed at higher rates. In a flat tax system, everyone pays the same rate regardless of income. The US system ensures higher earners contribute more in taxes, while lower earners benefit from reduced rates.
What is the Alternative Minimum Tax?
The Alternative Minimum Tax (AMT) ensures high earners pay a minimum amount of tax, even if they claim many deductions or credits.
To calculate AMT, you start with your income, add back certain deductions (like state and local taxes), and apply AMT rates after subtracting the AMT exemption. If the AMT is higher than your regular tax, you pay the AMT instead.
Marginal vs. Effective tax rates
Your marginal tax rate is the rate on your last dollar of income, while your effective tax rate is the average rate on all your taxable income.
For instance, if your marginal rate is 22%, only income within that bracket is taxed at 22%. Your effective rate, however, includes lower rates from earlier brackets, making it lower overall.
What are some tips for tax filing?
Here are easy ways to simplify tax filing:
- Stay organized: Keep receipts, pay stubs, and relevant documents.
- File early: Avoid last-minute stress and penalties.
- Get professional help: A tax expert can ensure you’re compliant and maximize savings.
- Double-check everything: Verify forms for accuracy to avoid delays or audits.