What is a federal tax rate schedule?


Quick Answer

The IRS includes each year's tax rate schedules in Publication 17, notes IRS.gov. These schedules show the applicable marginal tax rates for each income bracket, allowing individuals to determine the amount of tax that they pay on each portion of their income. The agency does not permit taxpayers to use the schedules to directly compute their tax liability, requiring them instead to use tax tables if their income falls below $100,000, or tax computation worksheets if it exceeds that amount.

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Full Answer

The IRS's tax rate schedules include Schedule X for single taxpayers; Schedule Y-1 for taxpayers who are married and filing jointly or are a qualifying widow; Schedule Y-2 for taxpayers married and filing separately; and Schedule Z for individuals who are the head of their household, according to the IRS. Although each schedule includes the same tax rates, which range from 10 to 39.6 percent as of August 2015, the corresponding income brackets vary between different filing statuses.

Under the United States' progressive tax regime, moving into a higher income tax bracket with increased rates does not affect the amount an individual pays in taxes on his existing income, explains The US Tax Center. Rather, the increased rate only applies on each additional dollar of income, until the taxpayer moves into yet another tax bracket. As such, a taxpayer's marginal tax rate normally differs from his average tax rate, notes the Motley Fool. To determine his average, or effective, tax rate, an individual divides the tax liability indicated on his tax table by his total level of income.

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