What is federal income tax?
Federal income tax is “taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends),” according to the IRS. In the U.S., both individuals and businesses must pay federal income tax.
Federal taxes are the U.S. government’s main source of funding. In 2018, individual income taxes accounted for approximately 56% of the federal government’s total $3.3 trillion in revenue, according to the Congressional Budget Office.
Taxes help keep the federal government running and providing essential services, such as benefits for senior citizens, veterans, the disabled and low-income families. Tax revenue also supports other important government operations and departments, like defense, transportation, health, justice and international affairs.
How is federal income tax calculated?
Calculating your federal income tax is complicated, but federal tax brackets are an important starting point. A tax bracket is a range of taxable income with a corresponding tax rate. The U.S. has seven federal tax rates: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Tax brackets basically help you understand what tax rate (or rates) will apply to your taxable income in federal income tax calculations.
Here are the tax rates and their corresponding tax brackets based on filing status.
2019 Tax Rates and Brackets
|Tax rate||Single||Married filing jointly and surviving spouse||Head of household||Married filing separately|
|37%||$510,301 and more||$612,351 and more||$510,301 and more||$306,176 and more|
Federal income tax is progressive, so your taxable income can fall into more than one tax bracket. The highest tax bracket that applies to your income determines your marginal tax rate. For each tax bracket and filing status, calculating federal tax means applying the tax rate for that bracket to the portion of your taxable income that falls within the bracket thresholds, plus any additional amount of tax associated with that bracket.
Here’s an example of how federal income tax calculation works.
If you’re a single filer with taxable income of $9,000, your marginal tax rate is the lowest — 10% — because your total taxable income falls within the threshold for the lowest tax bracket.
But what if you’re a single filer earning taxable income of more than $510,300? Your marginal tax rate is the highest (37%), because $510,301 is the lowest threshold amount for that tax bracket, which is the final one your income falls into. But only the portion of your income that exceeds $510,300 will be taxed at 37%. All the lower tax brackets also apply to the portions of your income that fall within those brackets - the 10% rate applies to the first $9,700 of your taxable income, 12% to the next $29,774 and so on.
Federal tax exemptions
There are multiple ways to reduce the amount of tax you owe, such as taking deductions or credits that reduce the amount of income on which you’ll pay federal income tax. Historically, Americans who met income requirements have been able to lower their adjusted gross income (or AGI) — which helps determine taxable income — by taking personal exemptions.
The Tax Cuts and Jobs Act of 2017 suspended personal exemptions until the 2026 tax year. So you can’t take any personal exemptions for your 2019 federal income tax calculations.
Federal tax deductions and credits
Federal tax deductions and tax credits can also help reduce your tax bill. A tax deduction lowers the amount of income you pay tax on, which can in turn reduce the amount of tax you owe. A tax credit is a dollar-for-dollar reduction in the amount of tax you owe.
There are three types of deductions: standard, itemized and “above-the-line” deductions. The standard deduction is a set dollar amount you can trim from your AGI, thereby reducing your taxable income. Here are the standard deductions by filing status for 2019.
|Filing status||Standard deduction amount|
|Single and married filing separately||$12,200|
|Married filing jointly and surviving spouses||$24,400|
|Head of household||$18,350|
If you decide to take the standard deduction, you’ll reduce your AGI by the deduction for your filing status. If you decide to itemize your deductions instead of taking the standard deduction, you’ll list all your qualifying deductible expenses on Schedule A and submit it with your Form 1040 tax return. Above-the-line deductions are ones you can take without itemizing, in addition to your standard deduction. For 2019, you’ll list those on Schedule 1.
A number of deductions and credits are available and each has its own eligibility requirement.
Here are some deductions and credits available for 2019 federal income taxes.
Student loan interest deduction — If you paid interest on a qualified student loan in 2019, use any filing status except married filing separately, meet income requirements, and aren’t claimed as a dependent on someone else’s return, you may be able to take this deduction.
Child tax credit — For 2019, the maximum child tax credit is $2,000 per qualifying child. You must meet income requirements to claim a full or partial credit.
Education credits — Qualifying filers may be able to claim the American opportunity tax credit or the lifetime learning credit. The AOTC could be worth up to $2,500 and LLC could each be worth up to $2,000, but you can’t claim both for the same student in the same tax year, and you must meet qualifications in order to claim either.
Mortgage interest deduction — If you pay interest on a mortgage or home equity loan to buy, build or substantially improve your home that secures the loan, you may be able to deduct all or some of your mortgage interest. How much you can deduct depends on a number factors, including when you took out your mortgage, and you must itemize deductions on Schedule A to take this deduction.
Charitable contributions deduction — If you donated to qualified charity in 2019 and itemize your deductions on your 2019 tax return, you may be able to claim this deduction.
Medical and dental expenses — Another itemized deduction, if you had qualifying medical or dental expenses amounting to more than a certain percentage of your AGI, you may be able to take this deduction.
Earned income tax credit — This credit is designed to help lower-income earners, so you’ll have to meet income requirements and have earned income in order to claim it. For 2019, the EITC is worth a maximum amount of $6,557, for eligible filers with three or more qualifying children — although you don’t have to have kids to qualify for a reduced amount of credit.
Your federal tax refund
Many people probably file their federal income tax returns hoping for a tax refund. Typically, you pay your federal income tax throughout the year, either through the payroll withholdings your employer takes out of your paycheck or through estimated tax payments if you’re self-employed. Pay too little, and you could owe Uncle Sam on Tax Day. Pay too much, and you could get an IRS refund of the amount you overpaid.
Tax calculators can help you estimate your tax refund, but when will your federal refund arrive? The IRS says most people can expect their refunds in less than 21 days, and e-filing and choosing to have your refund directly deposited into your financial account (whether you e-file or paper file) can be the fastest way to get your refund. Direct deposit is not only faster than waiting for a paper check to arrive in the mail, it’s more secure — direct deposit means you won’t have your refund check get lost in the mail.
If you want to track your refund, you can use the IRS “Where’s My Refund?” tool.
Frequently asked questions
What is a federal allowance?
A federal withholding allowance refers to information that is on the W-4 form for tax years before 2020. You generally fill out a W-4 when you start a new job or experience a life change, like having a child. Your W-4 helps your employer understand how much tax to withhold from your paycheck. Before 2020, the number of personal allowances you take helps determine the amount your employer withholds — the more allowances you claimed, the less tax your employer would withhold. But the IRS is changing the W-4 starting with the 2020 tax year. The new form eliminates personal allowances. Learn more about the new W-4.
What’s the difference between federal taxable and adjusted gross income?
Adjusted gross income (or AGI) is your gross income (all the income you receive in a year) minus above-the-line adjustments (deductions you can take without itemizing). These can include certain business expenses, contributions to health savings accounts, educator expenses, student loan interest and other adjustments. After you’ve calculated your AGI on your Form 1040, you then deduct your standard deduction or itemized deductions, and any qualified business income, to arrive at your taxable income. That’s the amount of income you’ll have to pay taxes on.
How much tax do you pay on $10,000?
How much tax you pay on any amount of income depends on multiple factors, including your filing status and any deductions or credits you may qualify for. For the sake of simplicity, let’s assume you’re a single filer whose taxable income is exactly $9,000 and you’re not taking any credits. Your 2019 federal income tax liability would be $900, according to IRS tax tables. But before you start worrying about what’s next, at that income level you may not be required to file a federal return. The IRS offers an online tool to help you determine if you may or may not need to file.
Do I have to file taxes if I made less than $10,000?
If your gross income was less than $10,000, you may not have to file a federal income tax return. But you may still want to file if you worked during 2019 and your employer withheld tax from your paycheck. Filing a tax return — even if you’re not required to do so — is the only way to get any tax you’re owed refunded to you.
How much do you get back in taxes for a child in 2019?
There are multiple tax breaks for parents, including the child tax credit. For 2019, the child tax credit is worth a maximum of $2,000 per qualifying child. Up to $1,400 of that amount is refundable — meaning if the credit reduces your tax bill to zero, you could receive the difference (up to $1,400) back as a refund. Tax reform expanded the credit to also include a $500 nonrefundable credit for qualifying dependents who aren’t children, and boosted the phase-out limits to an AGI of more than $400,000 for taxpayers who are married filing jointly and $200,000 for everyone else. The higher limits mean that more people could qualify for the credit.
Now that you’ve used our federal income tax calculator to get an idea of how much of a refund you can expect (or if you’ll owe the IRS), you can sign into your Credit Karma Tax® account and use the premium tax-filing tool to file your federal and single-state tax returns for free from start to finish.