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.
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
|
$8,025 |
10% |
-- |
| $8,025 |
$32,250 |
$802.50 + 15% |
$8,025 |
$32,250
|
$78,850 |
$4,481.25 + 25% |
$32,250 |
| $78,850 |
$164,550 |
$16,056.25 + 28% |
$78,850 |
| $164,550 |
$357,700 |
$40,052.25 + 33% |
$164,550 |
| $357,700 |
-- |
$103,791.75 + 35% |
$357,000 |
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 |
$8,962.50 + 25% |
$65,100 |
| $131,450 |
$200,300 |
$25,550 + 28% |
$131,450 |
| $200,300 |
$357,700 |
$44,828 + 33% |
$200,300 |
| $357,700 |
-- |
$96,770 + 35% |
$357,000 |
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 |
$42,755 + 33% |
$182,400 |
| $357,700 |
-- |
$100,604 + 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 |
$802.50 + 15% |
$8,025 |
$32,550
|
$65,725 |
$4,481.25 + 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 2007. Using Table A, above, your tax liability would be $4,481.25 plus 25% of income above $32,250, or $7,750 in your case. That works out to be $1937.50 for a total federal income tax liability of $6,418.75.
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."
