It’s important to be fully aware of the different levels of federal taxation and the accompanying tax rates. Whether you’re trying to claim deductibles and expenses to get yourself into a lower bracket and save on taxes owed, or if you’re just curious to see how much more you need to earn in order to move up a bracket, the following information and tables will come in handy.
Marginal Tax Rates For 2017
Your marginal tax rate will vary depending on whether or not you are single or married. If you’re married, it will also vary based upon whether or not you file jointly or separately.
|Marginal Tax Rate||Single Taxable Income||Married Filing Jointly or Qualified Widow Taxable Income||Married Filing Separately Taxable Income||Head of Household Taxable Income|
|10%||$0 – $9,325||$0 – $18,650||$0 – $9,325||$0 – $13,350|
|15%||$9,326 – $37,950||$18,651 – $75,900||$9,326 – $37,950||$13,351 – $50,800|
|25%||$37,951 – $91,900||$75,901 – $153,100||$37,951 – $76,550||$50,801 – $131,200|
|28%||$91,901 – $191,650||$153,101 – $233,350||$76,551 – $116,675||$131,201 – $212,500|
|33%||$191,651 – $416,700||$233,351 – $416,700||$116,676 – $208,350||$212,501 – $416,700|
|$416,701 – $470,700||$208,351 – $235,350||$416,701 – $444,550|
Standard Deduction and Personal Exemption
The personal exemption amount for the year 2017 will remain the same as it was before at $4,050.
|Filing Status||Deduction Amount|
|Married Filing Jointly||$12,700|
|Head of Household||$9,350|
The IRS defines taxable income as gross income minus any deductions you are allowed. This does not just extend to cash that you receive. The IRS includes income attained in any manner, such as money, property, and services. This can extend to tips and gratuities received by servers, gains from inventory or property sales, interest, dividends, rents, royalties, alimony, and several other different sources of income.
It should also be noted however that there are a few types of income that are actually exempt from income tax. These types of income include a set amount of Social Security benefits, proceeds from life insurance, interest on municipal bonds, gifts, inheritance, and many benefits you are entitled to as an employee.
Overall gross income can be reduced by taking advantage of many types of allowable deductions. Many taxpayers seek qualified assistance when it comes time to prepare their tax return in order to make sure they are taking advantage of all of the available deductions to them. When comparing the interest tax rates in the table above, it makes sense to try and keep your taxable income as low as possible, especially if you are on the higher end of the earnings table.
An individual is allowed to take advantage of business deduction advantages even if they only operate a small business. They are entitled to many of the same deductions as any public company would be. The IRS defines a business as “any activity conducted with the intent to earn a profit on a regular basis”. Many business owners attempt to take advantage of as many of these deductions as possible to bring themselves into a lower tax bracket.
Some of the most common business deductions are as follows:
- Rent, phone lines, and utilities
- Public relations and advertising
- Trade shows, conventions, and seminars
- Business travel
- Office supplies and furniture
- Insurance and retirement plans
An individual’s personal and family expenses are usually not eligible for business deductions. However, that’s where personal deductions come into play as well.
Any individual in the United States with dependents is eligible for certain deductions known as personal exemptions. Each taxpayer is allotted a specific amount for this, along with an additional specific number for each child or dependent who is supported by the taxpayer. This number is adjusted annually for inflation.
The federal and state tax systems provide several different tax credits for both individuals and businesses. For individuals, these can include:
- Child credit – credit of up to $1,000 per qualifying child
- Child and dependent care credit – credit of up to $6,000, ineligible for income over $15,000
- Earned Income Tax Credit – credit granted based on a percentage of income for low income individuals and capped based on the amount of qualifying children
- Elderly and disabled credit – credit of up to $1,125
- Two mutually exclusive credits for college expenses
A Broad Overview
It’s important to keep in mind that this is simply a very broad overview related to federal income tax brackets, deductions, and credits. Income tax is not only imposed at the federal level. It’s also imposed by state governments and many local governments. Tax laws can vary state by state so it’s important to do your own research on the laws where you reside as well. In general though, this article should give you a pretty good idea of where you stand in regards to the 2017 tax rates.
It never hurts to speak to a qualified tax agent, whether directly at the IRS or by going through a storefront tax service or even a CPA. They will be able to help you figure out all relevant and available deductions for your personal circumstances and help to adjust your tax bracket if possible based on that. This can make a huge difference when it comes time to file your tax return. Depending on the deductions that you are able to claim if you own a small business, even $1,000 in expenses claimed could potentially make all the difference and lower you from the 25% tax bracket down into the 15% bracket. This can add up to saving yourself thousands of dollars if you’re eligible!