How federal income tax is calculated
- Gross income minus pre-tax contributions and adjustments gives your adjusted gross income (AGI).
- Subtract the standard deduction or your itemized deductions, whichever is larger, to get taxable income.
- Apply the tax brackets to taxable income, then subtract any tax credits.
2026 standard deduction
2026 federal tax brackets
Brackets are marginal: each rate applies only to the income inside that band. Moving into a higher bracket never makes your total tax go down — only the extra dollars are taxed at the higher rate.
Example
A single filer earning $75,000 with no other deductions has $58,900 of taxable income after the $16,100 standard deduction. Tax is 10% on the first $12,400 ($1,240), 12% on the next $38,000 ($4,560) and 22% on the last $8,500 ($1,870) — $7,670 in total, an effective rate of about 10.2%.
Effective vs. marginal rate
Your marginal rate is the rate on your next dollar of income — useful for judging a raise or a 401(k) contribution. Your effective rate is total tax divided by income, which is always lower.
Related Income Tax & Paycheck Tools
Understanding your federal marginal and effective tax rates allows strategic tax-advantaged planning. Calculate net paycheck earnings after withholdings with our Take Home Pay Calculator, convert annual and hourly compensation using the Salary Calculator, calculate self-employment obligations via the Freelancer Tax Calculator, and reduce taxable income using pre-tax contributions in our 401k Calculator.
Frequently asked questions
Should I itemize or take the standard deduction?
Itemize only if your deductible expenses — mortgage interest, state and local taxes (up to the SALT cap), and charitable gifts — add up to more than your standard deduction. Most households take the standard deduction.
Why is my refund different from this estimate?
Refunds depend on how much was withheld from your paychecks, credits you qualify for, and income or deductions not entered here. Enter your year-to-date withholding to compare.
Does this include state tax?
No. It estimates federal income tax only. Nine states have no wage income tax; others range from flat rates around 3–5% to progressive rates above 10%.