# What is My Tax Bracket?

Updated for Tax Year 2018

OVERVIEW

The term "tax bracket" refers to the highest tax rate charged on your income. Under the federal income tax system, different rates apply to different portions of your income. So people in, say, the 25 percent tax bracket don't actually pay 25 percent of their income in taxes; rather, the last dollar they earn is taxed at 25 percent.

### Progressive system, marginal rates

The federal income tax is progressive, meaning that tax rates increase as your taxable income goes up. For example in 2018, income was taxed at seven rates: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent. These are marginal rates, meaning that each rate applies only to a specific slice of income rather than to your total income. The rate that applies to the top slice of your income is your tax bracket.

### A simplified example of brackets

For a simple example of how progressive taxation works, say the government has three marginal rates, set up like this:

• 10 percent: \$0 to \$20,000
• 20 percent: \$20,001 to \$50,000
• 30 percent: \$50,001 and above

Now say your taxable income is \$75,000, which puts you in the 30 percent bracket. The first \$20,000 of that would be taxed at 10 percent, or \$2,000. The next \$30,000 would be taxed at 20 percent, or \$6,000. The final \$25,000 of your income is taxed at 30 percent, or \$7,500. Your total tax: \$15,500. Even though you're in the 30 percent bracket, you actually pay only about 20.7 percent of your income in taxes.

### Taxable income is what matters

Tax brackets apply only to your taxable income—that is, your total income minus all your adjustments and deductions. For example, a married couple each taking a \$5,500 IRA deduction could reduce their taxable income by \$35,000 in 2018 just by taking the IRA deductions and the standard deduction. This alone might be enough to drop the family into a lower tax bracket.

Congress decides how many tax brackets there are and what the rates will be for each bracket. It's the Internal Revenue Service's job to adjust income thresholds to keep pace with inflation. For example, in the 2018 tax year, for a married couple filing a joint return, the 10 percent bracket applied to the first \$19,050 in taxable income. The 15 percent bracket went up to \$77,400. The 22 percent bracket goes up to \$165,000, and so on. The top rate, 37 percent, applied when taxable income topped \$600,000. For single taxpayers, the thresholds were lower. The IRS announces the tax brackets for each year before that year begins.

Remember, when you use TurboTax to prepare your taxes, we’ll ask you simple questions and handle these calculations for you. We also offer a handy Tax Bracket Calculator to help you easily identify your tax bracket.

#### A TurboTax solution for every situation

See which tax prep product is right for you

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

• #### TURBOTAX ONLINE/MOBILE

• Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. \$0 federal (for simple tax returns) + \$0 state + \$0 to file offer only available with TurboTax Free Edition; offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase. Special discount offers may not be valid for mobile in-app purchases.
• QuickBooks Self-Employed Offer with TurboTax Self-Employed and TurboTax Live for Extension Filers: To receive your complimentary subscription to QuickBooks Self-Employed through 4/30/20, you must pay for your 2018 TurboTax Self-Employed or TurboTax Live return by 4/15/19 and sign-in and access your QuickBooks Self-Employed account via mobile app or at https://selfemployed.intuit.com/turbotax at least twice by 7/15/19. You will have the option of renewing your QuickBooks Self-Employed subscription by 4/30/20 for another year at the then-current subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section. See QuickBooks.com for price comparison. Offer not valid for existing QuickBooks Self-Employed subscribers already on a payment plan.
• Pays for itself (TurboTax Self-Employed): Estimates based on deductible business expenses calculated at the self-employment tax income rate (15.3%) for tax year 2018. Actual results will vary based on your tax situation.
• Anytime, anywhere: Internet access required; standard data rates apply to download and use mobile app.
• Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
• TurboTax Live Reviews: Displayed reviews are for the TurboTax Live standalone service from Tax Year 2017 and not for the new Turbo Tax product / TurboTax Live bundle available for Tax Year 2018.
• Pay for TurboTax out of your federal refund: A \$39.99 Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
• TurboTax Help and Support: Access to a TurboTax specialist is included with TurboTax Deluxe, Premier, Self-Employed and TurboTax Live; not included with Free Edition (but is available as an upgrade). TurboTax specialists are available to provide general customer help and support using the TurboTax product. SmartLook on-screen help is available on a PC, laptop or the TurboTax mobile app. Service, area of expertise, experience levels, wait times, hours of operation and availability vary, and are subject to restriction and change without notice.
• Tax Return Access, Smart Insights and My Docs features: Included with TurboTax Deluxe, Premier, Self-Employed, TurboTax Live or with PLUS benefits. Access to all tax-related documents we have on file for you is available through 10/31/2020. Terms and conditions may vary and are subject to change without notice.
• Easy Online Amend: Included with TurboTax Deluxe, Premier, Self-Employed, TurboTax Live or with PLUS benefits. Make changes to your 2018 tax return online for up to 3 years after it has been filed and accepted by the IRS through 10/31/2021. Terms and conditions may vary and are subject to change without notice.
• #1 best-selling tax software: Based on aggregated sales data for all tax year 2017 TurboTax products.
• Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
• CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
• #1 rated online tax prep provider: Based on independent comparison of the best online tax software by TopTenReviews.com January 29, 2018.
• Get tips from Turbo based on your tax and credit data to help get you to where you want to be: Tax and credit data accessed upon your consent.
• #### TURBOTAX GUARANTEES

• 100% Accurate Calculations Guarantee: If you pay an IRS or state penalty or interest because of a TurboTax calculation error, we’ll pay you the penalty and interest.
• Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Online Free Edition customers are entitled to payment of \$14.99 and a refund of your state purchase price paid.
• 100% Accurate Expert Approved Guarantee: If you pay an IRS or state penalty (or interest) because of an error that a TurboTax CPA, EA, or Tax Attorney made while providing topic-specific tax advice, a section review, or acting as a signed preparer for your return, we'll pay you the penalty and interest.
• Audit Support Guarantee: If you received an audit letter based on your 2018 TurboTax return and are not satisfied with how we responded to your inquiry, we’ll refund the applicable TurboTax federal 1040 and/or state purchase price you paid. TurboTax Free Edition customers are entitled to payment of \$14.99 and a refund of your state purchase price paid. We will not represent you or provide legal advice. Excludes TurboTax Business.
• TurboTax Free Guarantee: \$0 Federal + \$0 State + \$0 To File offer is available for simple tax returns with TurboTax Free Edition. A simple tax return is Form 1040 only, with no attached schedules.
• Satisfaction Guaranteed:
• If you use TurboTax Online or Mobile:
Satisfaction Guaranteed — or you don't pay. You may use TurboTax Online without charge up to the point you decide to print or electronically file your tax return. Printing or electronically filing your return reflects your satisfaction with TurboTax Online, at which time you will be required to pay or register for the product.
Try TurboTax software. If you're not satisfied, return it to Intuit within 60 days of purchase with your dated receipt for a full refund.
Try TurboTax software. If you're not satisfied, return it within 60 days of shipment with your dated receipt for a full refund (excluding shipping & handling).

• TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase. Prices subject to change without notice.
• Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
• Pay for TurboTax out of your federal refund: A \$39.99 Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
• About our TurboTax Product Experts: Customer service and product support vary by time of year.
• #1 best-selling tax software: Based on aggregated sales data for all tax year 2017 TurboTax products.
• Data Import: Imports financial data from participating companies; may require a free Intuit online account. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2016 and higher) and QuickBooks Desktop (2014 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.