Individuals are required to calculate three main measures of income on their tax return: total income, adjusted gross income (AGI), and taxable income. The tax code indicates both how to measure income subject to taxation and the tax rates that apply to that income. So, when a tax bracket gets wider (i.e., there's more space between the high and low incomes for the bracket), there's less chance you will end up in a higher tax bracket when your income stays the same, or when it doesn't grow at the rate of inflation from one year to the next.As specified in the tax code, an individual income tax is imposed on the wages, salaries, investments, and other forms of income that people earn.Inflation-adjusted tax brackets can help prevent “bracket creep,” which according to the Tax Foundation, “occurs when people are pushed into higher income tax brackets or have reduced value from credits and deductions due to inflation, instead of any increase in real income.". If your income hasn’t changed much since last year, you might still be in a lower tax bracket for 2023 because of the inflation adjustments.Due to inflation, these brackets were adjusted significantly from the 2022 tax brackets (also included below). Here are the 2023 federal tax brackets and income tax rates for the four most common filing statuses. However, for head-of-household filers, last year's tax bracket went from $55,901 to $89,050. Last year, for single filers, the 22% tax bracket started at $41,776 and ended at $89,075. For example, for 2023, the 22% tax bracket range for single filers is $44,726 to $95,375, while the same rate applies to head-of-household filers with taxable income from $59,851 to $95,350. Tax bracket ranges also differ depending on your filing status. Graphics) Federal tax brackets based on filing status State tax rates and amounts due, if any, will vary. Remember: We're talking about federal tax. The total estimated federal tax of $4,580 is still a bit ($220) lower than the $4,800 you would be taxed if a flat 12% federal rate applied to your $40,000 of income. The next $28,999 of your income (i.e., the income between $11,001 to $44,725, which will make sense when you see the tax brackets below) gets taxed at the 12% federal rate.The first $11,000 of your income is taxed at the 10% tax rate.The rest of your income gets taxed at the federal income rate below 12%, i.e.,10%. Instead, your $40,000 will get taxed at a marginal tax rate, so only some of your income is taxed at the maximum tax rate for your income that year (12%). You might think your tax would be $4,800 since $40,000 falls into the 12% federal bracket. Take another example of someone single with a taxable income for 2023 of $40,000. The chart below shows estimates of how much of your income would be taxed at each rate. Remember that we're talking about federal tax. That is $6,600 less than if a flat 24% federal tax rate applied to your entire $100,000 of income. You can see that the estimated total federal tax on your $100,000 of taxable income given marginal tax rates would be about $17,400.
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