Filing Status & Witholding

A key to tax planning is knowing your marginal tax rate. That’s the rate that applies at the margin, to your top dollar of income. Under our graduated income tax system, as income rises, not only does your tax bill go up but the percentage of that income claimed by the government also increases.

Your marginal rate is affected by your filing status. While everyone faces the same seven tax brackets, the brackets hold different amounts of income depending on whether your file as a single person, for example, or you are married and file a joint return with your husband or wife. The wider the brackets, the slower you march up into higher rates. Starting in 2018, the new top bracket is now 37%, coupled with the additional Medicare Tax of 3.8%, which means the top bracket is really 40.8%. In essence, if you are in the top bracket, you get to take home 59% of your income.

Knowing your marginal rate is essential because it lets you determine how much of any extra earnings – from investments, a raise or moonlighting – you get to keep. It also measures the saving power of deductible expenses. Only if you know your tax bracket can you pinpoint what a charitable contribution or a business expense really costs you after your tax savings are taken into account.

The bottom line is this: knowing how high your tax bracket is can help you understand your tax-planning efforts.

2016

Schedule X
Single

If taxable income is over But not over The tax is:
$0 $9,275 10% of the amount over $0
$9,276 $37,650 $927.50 plus 15% of the amount over $9,275
$37,651 $91,150 $5,183.75 plus 25% of the amount over $37,650
$91,151 $190,150 $18,558.75 plus 28% of the amount over $91,150
$190,151 $413,350 $46,278.75 plus 33% of the amount over $190,150
$413,351 $415,050 $119,934.75 plus 35% of the amount over $413,350
$415,051 no limit $120,529.75 plus 39.6% of the amount over $415,050

Schedule Y-1
Married Filing Jointly or Qualifying Widow(er)

If taxable income is over– But not over– The tax is:
$0 $18,550 10% of the amount over $0
$18,551 $75,300 $1,855 plus 15% of the amount over $18,550
$75,301 $151,900 $10,367.50 plus 25% of the amount over $75,300
$151,901 $231,450 $29,517.50 plus 28% of the amount over $151,900
$231,451 $413,350 $51,791.50 plus 33% of the amount over $231,450
$413,351 $466,950 $111,818.50 plus 35% of the amount over $413,350
$466,951+ no limit $130,578.50 plus 39.6% of the amount over $466,950

Schedule Y-2
Married Filing Separately

If taxable income is over– But not over– The tax is:
$0 $9,275 10% of the amount over $0
$9,276 $37,650 $927.50 plus 15% of the amount over $9,275
$37,651 $75,950 $5,183.75 plus 25% of the amount over $37,650
$75,951 $115,725 $14,758.75 plus 28% of the amount over $75,950
$115,726 $206,675 $25,895.75 plus 33% of the amount over $115,725
$206,676 $233,475 $55,909.25 plus 35% of the amount over $206,675
$233,476+ no limit $65,289.25 plus 39.6% of the amount over $233,475

Schedule Z
Head of Household

If taxable income is over– But not over– The tax is:
$0 $13,250 10% of the amount over $0
$13,251 $50,400 $1,325 plus 15% of the amount over $13,250
$50,401 $130,150 $6,897.50 plus 25% of the amount over $50,400
$130,151 $210,800 $26,835 plus 28% of the amount over $130,150
$210,801 $413,350 $49,417 plus 33% of the amount over $210,800
$413,351 $441,000 $116,258.50 plus 35% of the amount over $413,350
$441,001+ no limit $125,936 plus 39.6% of the amount over $441,000