How to Find Your Tax Bracket

Even though no one particularly likes to pay taxes, everyone needs to know how to fill out their basic information. All the paperwork and fine print may seem daunting, but simple tasks like finding your tax bracket are straightforward. Read on to learn how to find what tax bracket you'll be in for the coming year -- and just how easy it is!

Been There, Done That

As a business co-owner since 2004 and someone who has filed her taxes since the '80s, I've learned a few tricks on how to find your bracket. It's not something that anyone needs to be intimidated about.

Of course, any government can and will make changes to the law, and as citizens, we are responsible for meeting our legal requirements, whatever they are in a given year. It's prudent to check up on what the government is regularly doing.

Definitions

First, let's be clear about what a bracket is. A "bracket" is simply the range of income that will be taxed at a particular percentage. You don't have to do fancy calculations to figure it out. You'll need the current official rates from the Internal Revenue Service (IRS) and your income (or projected income).

There are also many free calculators online where you can plug in your income and filing status and/or various financial choices. These calculators will then give you the bracket you can expect to be in for that particular scenario.

These "choices" might include making deposits to an Individual Retirement Account or pre-tax childcare expenses, for example. Of course, any calculator not sponsored by the IRS is for estimation only; the IRS is the authority.

Also, don't panic if you've formed an LLC (Limited Liability Corporation) but don't see how to pay "LLC tax." There is no LLC tax. If you're a single-member LLC, you are taxed like a Sole Proprietor. If there is more than one partner, the IRS treats you as a partnership.

It is also important to know that the IRS does not tax every dollar the same way; the US has a progressive tax system. So your tax bracket only applies to each dollar within that bracket of income. The bracket plus $1 means that your extra dollar is taxed at whatever the next tax bracket is.

Helpful Longstanding Tax-Related Information Publishers

Obviously, things change frequently about taxation. But in addition to the information you'll find on our site, there are other standout and reputable authorities online that can help a small business owner make informed decisions moving forward. These include: Nerd Wallet, TaxAct, and UpCounsel for more established businesses (LLC's and S Corporations.)

TaxAct Calculator Example

Here's a quick example of a calculator and the information you'd find as a result of using TaxAct's free online tool. Just plug in your filing status (i.e., married/single/joint) and a few other details of your tax and financial situation.

So let's use some hypothetical numbers for Jane Doe. We'll say Jane is single, has a child who needs daycare, is self-employed, and made $50,000 gross last year. So we put that into the calculator as follows for the 2019 tax year:

Gross Income: $50,000

Filing Status: Single

(Under "Advanced" Options)

Payments into Retirement Accounts: $0

Pre-tax child-care Costs $11,000

Standard Deduction: $12,200

The calculator spits out that Jane is in the 12% tax bracket. It's important to note that not every dollar is taxed in the same way, as you'll see in the full calculation they give for Jane:

10% tax bracket $9,700 X 10%=$970

12% tax bracket ($37,800 - $9,700) X 12%=$3,372

Total income tax $970 + $3,372=$4,342

Obviously, if you were Jane, you could consider filing as head of household, etc., and see how that affects your tax picture. If Jane could make retirement deposits, that too would reduce her taxable income.

The IRS

If you are completing your own taxes, you will need to examine the "bible" on tax brackets - and that's the yearly guidance information from the IRS itself. This link takes you to the IRS tax bracket tables. Note that these are based on your taxable income (also known as your "Adjusted Gross Income"), whereas our calculator above is based on Jane's Gross (aka total) income.

The Bottom Line

Last but far from least, as far as the USA goes, don't believe anyone who tells you that American citizens are taxed at an outrageously high level. As of 2020 (per the Bradford Tax Institute), we are at a historically low level, as you can see from the Bradford Institute records.

Don't be intimidated by tax brackets. You can figure them out. There are plenty of helpful resources that you can access.