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."
2008-07-21 17:03:58
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