Federal income tax brackets show a table where a specific level of income is matched with a corresponding tax percentage depending on the taxpayer’s filing status, according to Investopedia. A federal income tax percentage is an annual federal government tax rate deducted from an individual’s or corporation’s earnings.Continue Reading
The purpose of a federal income tax bracket is to determine what a taxpayer's income tax rate is, adds Investopedia. As of the 2014 tax year, there are seven tax rates, which correspond to different levels of income depending on the taxpayer's filing status. The taxpayer can file as single, married filing jointly or separately, a widow/widower with a dependent child, or as the head of household.
Since the United States has a progressive tax system, a higher income leads to a higher tax rate within the federal income tax bracket, states Investopedia. It is important to note that each tax rate applies to specific levels of income and not all taxable income. For example, in the 2014 federal income tax bracket, a single taxpayer who earns $15,000 does not pay a 15 percent tax rate on all taxable income. That taxpayer pays a 10 percent tax rate on the first $9,076 and 15 percent on income between $9,076 and $15,000.Learn more about Income Tax