What are IRS tax percentage rates?


Quick Answer

The IRS tax percentage rates are the tax rates applied to income, according to Forbes. Tax rates are applied to taxable income, which is income after all deductions have been applied, in order to calculate tax, states the Internal Revenue Service.

Continue Reading

Full Answer

Every year, the IRS announces tax brackets, based on dollar amounts, that correspond to IRS tax percentage rates, according to Forbes. The rates are determined by the current version of the Internal Revenue Code and are adjusted based on Revenue Procedures issued by the IRS. The 2015 rates were announced in Revenue Procedure 2014-61, according to KPMG. As of 2015, there are seven tax percentage rates: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent. The dollar brackets vary based on filing status, with married filing jointly yielding the best benefit, but the applicable methodology is the same.

Taxpayers calculate taxable income by taking gross income and subtracting all relevant deductions and exemptions, according to the IRS. Then, the tax rates are applied based on the tax tables that pertain to a taxpayer's filing status in a tiered structure. For example, if taxable income is equal to $20,000, tax would be calculated based on the first two tax percentage rates in a cumulative fashion. In this example, a single taxpayer in 2015 would pay $922.50 for the 10 percent tax bracket on the initial $9,225 of taxable income, and 15% on the amount over $9,225 for total tax due of $2,538.75. If applicable, tax credits are then applied to the total tax to find tax due.

Learn more about Taxes

Related Questions