Current Tax Brackets

For 2008, the six income tax rates for individual taxpayers are 10%, 15%, 25%, 28%, 33%, and 35%.

In addition to cutting tax rates, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 created the 10% tax bracket for lower incomes.

In 2007 for single taxpayers and married persons filing a separate return, the first $8,025 of income is taxed at this rate. For married persons filing a joint return, the first $16,050 is taxed at 10%. For persons filing as head of household, the first $11,450 is taxed at the 10% rate.

It helps to think of your tax rate in terms of a marginal tax rate. This is the tax rate on the last dollar of income that you earned. As your taxable income increases, you are taxed at a higher tax rate as a result of being bumped into a higher income tax bracket.

The following tables show the cutoff points in taxable income for 2008 that mark each income tax bracket:

Table A: Single tax return:

If taxable income is:		Amount of tax that you owe is:
More than:	However, not over:	This amount (or %) plus % of:	Amount over:
$0	$7,550	10%	--
$8,025	$32,550	$803 + 15%	$8,025
$32,550	$78,850	$4,481 + 25%	$32,550
$78,850	$164,550	$16,056 + 28%	$78,850
$164,550	$357,700	$40,052 + 33%	$164,550
$357,700	--	$103,792 + 35%	$357,700

Table B: Married Filing Jointly (MFJ) or Qualifying Widow(er):

If taxable income is:		Amount of tax that you owe is:
More than:	However, not over:	This amount (or %) plus % of:	Amount over:
$0	$16,050	10%	--
$16,050	$65,100	$1,605 + 15%	$16,050
$65,100	$131,450	$8,963 + 25%	$65,100
$131,450	$200,300	$25,550 + 28%	$131,450
$200,300	$357,700	$44,828 + 33%	$200,300
$357,700	--	$86,770 + 35%	$357,700

Table C: Head of Household tax return:

If taxable income is:		Amount of tax that you owe is:
More than:	However, not over:	This amount (or %) plus % of:	Amount over:
$0	$11,450	10%	--
$11,450	$43,650	$1,145 + 15%	$11,450
$43,650	$112,650	$5,975 + 25%	$43,650
$112,650	$182,400	$23,225 + 28%	$112,650
$182,400	$357,700	$44,828 + 33%	$200,300
$357,700	--	$96,770 + 35%	$357,700

Table D: Married Filing Separate (MFS) return:

If taxable income is:		Amount of tax that you owe is:
More than:	However, not over:	This amount (or %) plus % of:	Amount over:
$0	$8,025	10%	--
$8,025	$32,550	$803 + 15%	$8,025
$32,550	$65,725	$4,481 + 25%	$32,550
$65,725	$100,150	$12,775 + 28%	$65,725
$100,150	$178,850	$22,414 + 33%	$100,150
$178,850	--	$48,385 + 35%	$178,850

For example, say you file a single return and have taxable income of $40,000 in 2008. Using Table A, above, your tax liability would be $4,481 plus 25% of income above $32,550, or $7,450 in your case. That works out to be $1,863 for a total federal income tax liability of $6,344.

To prevent you from being bumped into the next-higher bracket as a result of a cost-of-living wage increase, the IRS adjusts upward the amount of income that can be earned for each tax bracket every year. This phenomenon of being bumped into the next-higher tax bracket is sometimes called "bracket creep."