Tax Table Definition

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Tax Table Definition

What Is a Tax Table?

A tax table is a chart that shows the amount of tax owing depending on the income received. The Internal Revenue Service (IRS) provides tax tables to assist people in determining how much tax they owe and how to compute it when filing their yearly tax returns. In the tax table, the IRS presents several tax ranges based on tax filing status. Tax rates may be shown as a fixed sum, a percentage rate, or a mix of the two. Individuals, businesses, and estates utilize tax tables for both ordinary income and capital gains. They are updated once a year.

Key Takeaways

  • A tax table is a chart that shows the amount of tax owed depending on the amount of income received.
  • When people submit their yearly tax returns, the IRS publishes tax tables to assist them in determining how much tax they owe and how to compute it.
  • Income ranges and filing status are separated into tax tables.
  • Individual and business taxpayers with low income levels often utilize tax tables, while high-income earners employ more complex tax rate schedules.
  • The IRS updates tax tables once a year.

How Tax Tables Work

Every year, businesses and individuals pay an effective tax rate on their revenue. The tax paid by each entity is determined by a variety of criteria, including:

  • Status of the filing (single, married filing separately, married filing jointly, or head of household)
  • Tax credits and deductions that apply
  • Exemptions
  • The amount of money generated during a tax year.

Taxpayers and taxing authorities may calculate the amount of tax to be paid by each taxpayer based on these parameters and the tax rates established for the year.

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A typical tax table depicts income breakpoints, above and below which various tax rates apply. However, the income in tax tables is taxable income, not gross income. Taxable income is defined as gross income less deductions. As a result, only the dollar amount remaining after deductions is liable to income tax.

For example, the standard deduction for single taxpayers in 2021 is $12,500 ($12,950 in 2022). In 2021, a taxpayer earning $65,000 for the year but only qualifying for the standard deduction pays income tax on $52,500 ($65,000 – $12,500). In general, the greater a taxpayer’s taxable income, the more they pay in taxes.

On the left, tax tables are set up with separate columns for each filing status and rows of varied taxable income amounts. The table shows a person’s tax obligation depending on their tax filing status and the amount moved to the individual’s income tax form.

Special Considerations

Individual and business taxpayers with moderate income levels often utilize tax tables. High-income individuals often employ more complicated tax rate schedules in combination with itemized deductions.

Personal income tax is calculated using tax tables in the majority of states. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming are the only states that do not levy a personal income tax. New Hampshire exclusively taxes dividend and interest income.

As previously stated, tax tables fluctuate from year to year and vary by state. Investors should always utilize the appropriate tax tables depending on their income sources and place of residence.

Example of a Tax Table

As previously stated, the IRS publishes new tax and earned credit tables each year. It calculates a tax range depending on your income level and splits the amount owing according to your tax filing status.

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The following is the tax table for taxpayers with taxable income of $46,000 in 2021:

IRS Tax Table 2021
If your taxable income is betweenSingle FilerMarried Filing JointlyMarried Filing SeparatelyHead of Household
$46,000 and $46,050$5,874$5,125$5,874$5,239
$46,050 and $46,100$5,885$5,131$5,885$5,245
$46,100 and $46,150$5,896$5,137$5,896$5,251
$46,150 and $46,200$5,907$5,143$5,907$5,257
$46,200 and $46,250$5,918$5,149$5,918$5,263
$46,250 and $46,300$5,929$5,155$5,929$5,269
$46,300 and $46,350$5,940$5,161$5,940$5,275
$46,350 and $46,400$5,951$5,167$5,951$5,281
$46,400 and $46,450$5,962$5,173$5,962$5,287
$46,450 and $46,500$5,973$5,179$5,973$5,293
$46,500 and $46,550$5,984$5,185$5,984$5,299
$46,550 and $46,600$5,995$5,191$5,995$5,305
$46,600 and $46,650$6,006$5,197$6,006$5,311
$46,650 and $46,700$6,017$5,203$6,017$5,317
$46,700 and $46,750$6,028$5,209$6,028$5,323
$46,750 and $46,800$6,039$5,215$6,039$5,329
$46,800 and $46,850$6,050$5,221$6,050$5,335
$46,850 and $46,900$6,061$5,227$6,061$5,341
$46,900 and $46,950$6,072$5,233$6,072$5,347
$46,950 and $47,000$6,083$5,239$6,083$5,353

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