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Year 2007 income brackets and tax rates
An individual's marginal income tax bracket depends upon their income and their
tax-filing classification. As of 2007, there are six tax brackets
for ordinary income (ranging from 10% to 35%) and four classifications:
single, married filing jointly (or qualified widow or widower),
married filing separately, and head of household.
| Marginal Tax Rate |
Single |
Married Filing Jointly or Qualified
Widow(er) |
Married Filing Separately |
Head of Household |
| 10% |
$0 – $7,825 |
$0 – $15,650 |
$0 – $7,825 |
$0 – $11,200 |
| 15% |
$7,826 – $31,850 |
$15,651 – $63,700 |
$7,826 – $31,850 |
$11,201 – $42,650 |
| 25% |
$31,851 – $77,100 |
$63,701 – $128,500 |
$31,851 – $64,250 |
$42,651 – $110,100 |
| 28% |
$77,101 – $160,850 |
$128,501 – $195,850 |
$64,251 – $97,925 |
$110,101 – $178,350 |
| 33% |
$160,851 – $349,700 |
$195,851 – $349,700 |
$97,926 – $174,850 |
$178,351 – $349,700 |
| 35% |
$349,701+ |
$349,701+ |
$174,851+ |
$349,701+ |
An individual pays tax at a given bracket only for each dollar within that bracket's range. For example, a single taxpayer who earned $10,000 in 2007 would be taxed 10% of each dollar earned from the 1st dollar to the 7,825th dollar (10% × $7,825 = $782.50), then 15% of each dollar earned from the 7,826th dollar to the 10,000th dollar (15% × $2,175 = $326.25), for a total of $1,108.75. Notice this amount ($1,108.75) is lower than if the individual had been taxed at 15% on the full $10,000 (for a tax of $1,500). This is because the individual's marginal rate (the percentage tax on the last dollar earned, here 15%) has no effect on the income taxed at a lower bracket (here the first $7,825 of income taxed at 10%). This ensures that every rise in a person's pre-tax salary results in an increase of their after-tax salary, contrary to the popular misconception that being bumped into a higher tax bracket reduces after-tax income.
Claiming deductions may reduce an individual's tax liability by a rate equal to the marginal tax rate of their particular tax bracket, with a corresponding reduction in returns as the individual crosses in to a lower tax bracket. For example, if an individual is able to increase the amount of their deduction by $1000 with a last-minute donation to a charitable organization, and the individual's adjusted gross income is $500 in to the 25% marginal tax bracket, the donation will reduce the tax liability of the individual by ($500 × 25%) + ($500 × 15%) = $200.
Year 2008 income brackets and tax rates
| Marginal Tax Rate |
Single |
Married Filing Jointly or Qualified
Widow(er) |
Married Filing Separately |
Head of Household |
| 10% |
$0 – $8,025 |
$0 – $16,050 |
$0 – $8,025 |
$0 – $11,450 |
| 15% |
$8,026 – $32,550 |
$16,051 – $65,100 |
$8,026 – $32,550 |
$11,451 – $43,650 |
| 25% |
$32,551 – $78,850 |
$65,101 – $131,450 |
$32,551 – $65,725 |
$43,651 – $112,650 |
| 28% |
$78,851 – $164,550 |
$131,451 – $200,300 |
$65,726 – $100,150 |
$112,651 – $182,400 |
| 33% |
$164,551 – $357,700 |
$200,301 – $357,700 |
$100,151 – $178,850 |
$182,401 – $357,700 |
| 35% |
$357,701+ |
$357,701+ |
$178,851+ |
$357,701+ |
Short-term capital gains are taxed as ordinary income rates as listed above. Long-term
capital gains have lower rates corresponding to an individual's
marginal ordinary income tax rate, with special rates for a
variety of capital goods.
| Ordinary Income Rate |
Long-term Capital Gain Rate |
Short-term Capital Gain Rate |
Long-term Gain on Real Estate |
Long-term Gain on Collectibles |
Long-term Gain on Certain Small Business Stock |
| 10% |
5% |
10% |
10% |
10% |
10% |
| 15% |
5% |
15% |
15% |
15% |
15% |
| 25% |
15% |
25% |
25% |
25% |
25% |
| 28% |
15% |
28% |
25% |
28% |
28% |
| 33% |
15% |
33% |
25% |
28% |
28% |
| 35% |
15% |
35% |
25% |
28% |
28% |
Example of a tax computation Income tax:
$40,000 (adjusted gross income)
$7,825 × 0.10 = $782.50
($31,850 - $7,825) × 0.15 = $3,603.75
($40,000 - $31,850) × 0.25 = $2,037.50
Total income tax = $6,423.75 (16.06% of income)
Note that in addition to income tax, a wage earner would also have to pay FICA (payroll) tax (and an equal amount of FICA tax must be paid by the employer):
$40,000 (adjusted gross income)
$40,000 × 0.062 = $2,480 (Social Security portion)
$40,000 × 0.0145 = $580 (Medicare portion)
Total FICA tax = $3,060 (7.65% of income)
Total federal tax of individual = $9,483.75 (23.71% of income)
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