2018 tax brackets and rates: How they affect tax calculations

Young woman sitting at desk, looking perplexed as she tries to use her 2018 tax bracket to calculate her income tax. Young woman sitting at desk, looking perplexed as she tries to use her 2018 tax bracket to calculate her income tax. Image:

In a Nutshell

Tax reform made significant (albeit temporary) changes to federal income tax brackets and tax rates. Changes to your bracket may benefit you. But to estimate your federal income taxes, you’ll need to know more than just your 2018 tax bracket.

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It’s the first thing the Tax Cuts and Jobs Act of 2017 addresses: individual income tax rates.

In fact, the section of the tax reform bill that addresses tax rates is titled “Reduction and Simplification of Individual Income Tax Rates.” But while tax reform may have simplified tax rates and brackets for some taxpayers, using your 2018 tax bracket to actually calculate your 2018 tax bill is likely to be as complicated as ever.

Let’s take a look at the tax brackets and rates that apply to your 2018 income tax return and explore how both will affect how much tax you could owe when you file your 2018 tax return in 2019.


Bracket basics

A tax bracket is basically a range of taxable income with a corresponding tax rate. The U.S. tax code has seven tax brackets — tax reform didn’t change that. Because our federal tax system is progressive, it’s possible for your income to fall into more than one bracket. The highest tax bracket that applies to your income determines your marginal tax rate.

Tax reform set the individual income tax rates at 10%, 12%, 22%, 24%, 32%, 35% and 37%.

2018 tax brackets

Here are the tax rates and their corresponding tax brackets based on filing status:

2018 Tax Bracket Thresholds

Taxable Income by Filing Status

Marginal tax rate Single Married filing jointly and surviving spouse Head of household Married filing separately
10% $0–$9,525 $0–$19,050 $0–$13,600 $0–$9,525
12% $9,526–$38,700 $19,051–$77,400 $13,601–$51,800 $9,526–$38,700
22% $38,701–$82,500 $77,401–$165,000 $51,801–$82,500 $38,701–$82,500
24% $82,501–$157,500 $165,001–$315,000 $82,501–$157,500 $82,501–$157,500
32% $157,501–$200,000 $315,001–$400,000 $157,501–$200,000 $157,501–$200,000
35% $200,001–$500,000 $400,001–$600,000 $200,001–$500,000 $200,001–$300,000
37% $500,001 and more $600,001 and more $500,001 and more $300,001 and more

 

This chart only shows the income thresholds for each tax bracket. You’ll need additional information from the Tax Cuts and Jobs Act in order to calculate your 2018 federal income tax. For each tax bracket and filing status, tax is calculated by applying the tax rate to income that falls within the thresholds for the bracket. So for income that falls outside of the 10% bracket, there’s an additional amount of tax — described in the law — that must be included in the calculation of total tax.

Calculating your tax

It’s no secret that calculating your taxes can get complicated, especially if you have a lot of itemized deductions, multiple sources of income, unusual sources of income or a complex financial situation like a business that lost money. All those factors can play a role in determining how much of your total income will be taxable income.

What counts as taxable income?

But even when you have a fairly simple tax situation — one source of wages, the standard deduction, no dependents — calculating your taxes is not as straightforward as just multiplying your taxable income by your marginal tax rate.

To calculate your tax, you need to know your taxable income and bracket, the tax rate for your bracket and your filing status.

Here are the tax brackets, tax rates and tax for each filing status for 2018.

Filing status: Single

Taxable income Income tax due
$0–$9,525 10% of taxable income
$9,526–$38,700 $952.50 + 12% of TI over $9,525
$38,701–$82,500 $4,453.50 + 22% of TI over $38,700
$82,501–$157,500 $14,089.50 + 24% of TI over $82,500
$157,501–$200,000 $32,089.50 + 32% of TI over $157,500
$200,001–$500,000 $45,689.50 + 35% of TI over $200,000
$500,001 and more $150,689.50 + 37% of TI over $500,000

 

Filing status: Married filing jointly and surviving spouse

Taxable income Income tax due
$0–$19,050 10% of taxable income
$19,051–$77,400 $1,905 plus 12% of TI over $19,050
$77,401–$165,000 $8,907 plus 22% of TI over $77,400
$165,001–$315,000 $28,179 plus 24% of TI over $165,000
$315,001–$400,000 $64,179 plus 32% of TI over $315,000
$400,001–$600,000 $91,379 plus 35% of TI over $400,000
$600,001 and more $161,379 plus 37% of TI over $600,000

 

Filing status: Head of household

Taxable income Income tax due
$0–$13,600 10% of taxable income
$13,601–$51,800 $1,360 + 12% of TI over $13,600
$51,801–$82,500 $5,944 + 22% of TI over $51,800
$82,501–$157,500 $12,698 + 24% of TI over $82,500
$157,501–$200,000 $30,698 + 32% of TI over $157,500
$200,001–$500,000 $44,298 + 35% of TI over $200,000
$500,001 and more $149,298 + 37% of TI over $500,000

 

Filing status: Married Filing Separately

Taxable income Income tax due
$0–$9,525 10% of taxable income
$9,526–$38,700 $952.50 + 12% of TI over $9,525
$38,701–$82,500 $4,453.50 + 22% of TI over $38,700
$82,501–$157,500 $14,089.50 + 24% of TI over $82,500
$157,501–$200,000 $32,089.50 + 32% of TI over $157,500
$200,001–$300,000 $45,689.50 + 35% of TI over $200,000
$300,001 and more $80,689.50 + 37% of TI over $300,000

 

Congress establishes the tax brackets and rates, and the IRS adjusts the bracket thresholds — typically from year to year — to compensate for inflation. So even though these brackets are in effect for tax years between Jan. 1, 2018 and Dec. 31, 2025, the bracket thresholds will likely be at least slightly different for 2019 if the IRS adjusts them for inflation.

A simple example

Remember we mentioned that the tax code is progressive? That means that the highest tax bracket your income falls into isn’t the only rate that gets applied to your taxable income. Instead, if multiple brackets apply to your income, you’ll pay the rate for each bracket on the portion of your income that falls within that bracket.

Here’s a very simple example of how it works. For the purposes of this example, let’s assume you’ve already done the calculations necessary to arrive at your taxable income (like taking the standard deduction and an education credit that you qualify for) and your filing status is single.

In 2018, your taxable income is $9,000. Your income falls within the lowest tax bracket ($0–$9,525). Regardless of your filing status, your income will be taxed at 10% and your tax bill will be $900. And you’re done!

Example 2 — a bit more complex

Let’s change the scenario slightly. Your taxable income is now $39,000, which puts you in the 22% tax bracket for your filing status. Now you need to calculate your tax using the 10% rate on your income up to $9,525, the 12% rate on income between $9,526 and $38,700, and 22% on the portion of your income in excess of $38,700. Plus you’ll need to add in the tax due (from the tables above) for your highest tax bracket.
Here are your calculations, step by step.

  1. $9,525 x .10 = $952.50
  2. $29,174 (the difference between the lower and upper ends of the bracket) x .12 = $3,500.88 (rounded up to $3,501)
  3. $300 (the portion of your income in excess of $38,700) x . 22 = $66

Now add the sums from all three steps to calculate tax due: $952.50 + $3,501 + $66 = $4,519.50. It’s a little more complicated to deal with different brackets, but you can still put pencil to paper to get there.

 

One more way to calculate

If you don’t want to wrestle with all that math, you can find your tax bracket in the above chart for your filing status and simplify your calculations a bit. Let’s apply that method to example No. 2.

Your taxable income is $39,000 and you’re in the 22% tax bracket for your single filing status. To calculate your tax, apply the 22% rate to your taxable income over the $38,700 threshold — $300 ($39,000 – $38,700 = $300). Your calculation will look like this: $300 x .22 = $66. Now simply add the tax due for your tax bracket from the table ($66 + $4,453.50) to get your total tax due: $4,519.50.


Bottom line

Tax reform simplified some aspects of the tax code but didn’t simplify the basic calculations you have to do in order to figure your tax bill. Thousands of pages of tax forms and instructions for those forms are intended to help taxpayers figure out their fair share of federal income tax every year. Free online filing services like Credit Karma Tax® can go a long way toward making the filing process easier because the software does critical calculations for you, based on information you provide from tax documents like W-2s, interest statements and 1099s.