Income tax is calculated in terms of different tax brackets. Most states use progressive tax rates, which simply means that as you earn more, you pay more back. The different categories of income are the tax brackets, which encompasses a range of incomes. The amount you have to pay is calculated as a percentage, called a marginal tax rate. The following table shows what the tax bracket and marginal tax rates are:
2018 tax rates – single taxpayers
Tax bracket | Marginal tax rate |
$0-9,525 | 10% |
$9,525-38,700 | 12% |
$38,700-82,500 | 22% |
$82,500-157,500 | 24% |
$157,500-200,000 | 32% |
$200,000-500,000 | 35% |
Over $500,000 | 37% |
2018 tax rates – married jointly & surviving spouse
Tax bracket | Marginal tax rate |
$0-19,050 | 10% |
$19,050-77,400 | 12% |
$77,400-165,000 | 22% |
$165,000-315,000 | 24% |
$315,000-400,000 | 32% |
$400,000-600,000 | 35% |
Over $600,000 | 37% |
Here you can see that for some tax brackets, it is significantly beneficial for some couples to get married to save on the amount they have to pay on income tax.
It may seem drastic for a single person, for example, to have to pay 37% on an income of $500,000, or 12% on an income of $9,625, when they’re only just within that tax bracket – and the good news is that they don’t have to. This is where marginal tax rates come into play. Essentially, what this means is that different income brackets are taxed differently: the first $9,525 is taxed at 10%, regardless if a person earns $8,000 annually or $9,525. The remaining $100 in the case of someone earning $9,625 is then taxed at 12% – and this goes on throughout the tax brackets.