How Federal Income Tax Works
The U.S. uses a progressive tax system with marginal tax brackets. This means only the income within each bracket is taxed at that bracket's rate — not your entire income.
Tax = Σ (Income in Bracket × Bracket Rate) − Credits
Standard Deduction vs. Itemized
- Standard Deduction (2025): $15,000 (Single), $30,000 (Married Jointly), $22,500 (Head of Household)
- Itemized Deductions: Mortgage interest, state/local taxes (SALT up to $10,000), charitable contributions, medical expenses
- Choose whichever is higher to reduce your taxable income
Marginal vs. Effective Tax Rate
- Marginal rate: The tax bracket your last dollar of income falls into
- Effective rate: Your actual total tax divided by total income — always lower than your marginal rate
Frequently Asked Questions
Does my entire income get taxed at my bracket rate? No. Only the portion within each bracket is taxed at that rate. If you're in the 22% bracket, only the income above the 12% bracket threshold is taxed at 22%.
What about state income tax? This calculator estimates federal taxes only. State taxes vary — some states have no income tax (TX, FL, WA, etc.) while others can add 5-13%.
Are FICA taxes included? No. Social Security (6.2%) and Medicare (1.45%) are separate payroll taxes not included in this estimate.