Rate tables

Rate schedule (federal income tax)

A rate schedule is a chart that helps United States taxpayers determine their federal income tax burden for a particular year. Another name for “rate schedule” is “rate table.”

Origin

The origin of the current rate schedules is the Internal Revenue Code of 1986 (IRC), which "is the official name for Title 26 of the United States Code. With that law, the U.S. Congress created four types of rate tables, all of which are based on a taxpayer’s filing status (e.g., “married individuals filing joint returns,” “heads of households").

Each year the United States Internal Revenue Service (IRS) updates rate schedules in accordance with guidelines that Congress established in the IRC. In general, the IRS bases such adjustments on inflation and cost of living increases in the previous year.

Format

All rate schedules have an identical format, containing three columns and six rows (called “brackets”). The first two columns indicate the range of taxable income that a taxpayer must have to qualify for a particular tax rate, and the third column indicates the tax rate itself. Given that Congress has prescribed a system of progressive taxation, all but the lowest-earning taxpayers pay distinct rates for different parts of their income.

The following are the IRS rate schedules for 2007:

Schedule XSingle

If taxable income is over-- But not over-- The tax is:
$0 $7,825 10% of the amount over $0
$7,825 $31,850 $782.50 plus 15% of the amount over 7,825
$31,850 $77,100 $4,386.25 plus 25% of the amount over 31,850
$77,100 $160,850 $15,698.75 plus 28% of the amount over 77,100
$160,850 $349,700 $39,148.75 plus 33% of the amount over 160,850
$349,700 no limit $101,469.25 plus 35% of the amount over 349,700
Schedule Y-1Married filing Jointly or Qualifying Widow(er)

If taxable income is over-- But not over-- The tax is:
$0 $15,650 10% of the amount over $0
$15,650 $63,700 $1,565.00 plus 15% of the amount over 15,650
$63,700 $128,500 $8,772.50 plus 25% of the amount over 63,700
$128,500 $195,850 $24,972.50 plus 28% of the amount over 128,500
$195,850 $349,700 $43,830.50 plus 33% of the amount over 195,850
$349,700 no limit $94,601.00 plus 35% of the amount over 349,700
Schedule Y-2Married Filing Separately

If taxable income is over-- But not over-- The tax is:
$0 $7,825 10% of the amount over $0
$7,825 $31,850 $782.50 plus 15% of the amount over 7,825
$31,850 $64,250 $4,386.25 plus 25% of the amount over 31,850
$64,250 $97,925 $12,486.25 plus 28% of the amount over 64,250
$97,925 $174,850 $21,915.25 plus 33% of the amount over 97,925
$174,850 no limit $47,300.50 plus 35% of the amount over 174,850

Schedule ZHead of Household

If taxable income is over-- But not over-- The tax is:
$0 $11,200 10% of the amount over $0
$11,200 $42,650 $1,120.00 plus 15% of the amount over 11,200
$42,650 $110,100 $5,837.50 plus 25% of the amount over 42,650
$110,100 $178,350 $22,700.00 plus 28% of the amount over 110,100
$178,350 $349,700 $41,810.00 plus 33% of the amount over 178,350
$349,700 no limit $98,355.50 plus 35% of the amount over 349,700

Use of Rate Schedules

To use a rate schedule, a taxpayer must know their filing status and amount of taxable income. Definitions related to one’s filing status can be found in IRC § A.2(a-b), and general guidelines regarding taxable income are described in IRC § A.63(a-b). Once a taxpayer has made these determinations, she (1) references the pertinent rate schedule, (2) finds the appropriate bracket (based on her taxable income), and (3) uses the formula described in the third column to determine her federal income tax.

Assume, for example, that Taxpayer A is single and has a taxable income of $175,000 in 2007. The following steps apply the procedure outlined above:

(1) Because she is single, the pertinent rate table is Schedule X.
(2) Given that her income falls between $160,850 and $349,700, she uses the fifth bracket in Schedule X.
(3) Her federal income tax will be “$39,148.75 plus 33% of the amount over 160,850.” Applying this formula to Taxpayer A, one arrives at the following result:
$39,148.75 + (0.33 * ($175,000 - $160,850)) =
$39,148.75 + (0.33 * $14,150) =
$39,148.75 + $4,669.50 = $43,818.25.

Accordingly, Taxpayer A must pay $43,818.25 in federal income taxes for 2007.

References

See also

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