Federal Tax Brackets

Your tax bracket is the rate you pay on the "last dollar" you earn; but as a percentage of your income, your tax rate is generally less than that. First, here are the tax rates and the income ranges where they apply:

Tax bracket is defined based on the gross income before the exclusion ("Effective for tax years beginning after 2005, the amount of foreign earned income (and foreign housing costs) excluded from an individual's gross income will be used for purposes of determining the rate of income and alternative minimum tax (AMT) that applies to his or her nonexcluded income.") - see www.taxesforexpats.com/expat-tax-advice/code-evolution.html

When you plug in numbers to the online calculator , you have to add back excluded amount to taxable income.

Tax Year:
Filing Status:
If your taxable income is between... your tax bracket is:
and %
and %
and %
and %
and %
and %

To take an example, suppose your taxable income (after deductions and exemptions) was exactly $100,000 in 2008 and your status was Married filing separately; then your tax would be calculated like this:

($ 8,025   minus   0 )   x .10 :      $   802.50
( 32,550   minus   8,025 )   x .15 : 3,678.75
( 65,725   minus   32,550 )   x .25 : 8,293.75
(100,000   minus   65,725 )   x .28 : 9,597.00
    Total:   $ 22,372.00

This puts you in the 28% tax bracket, since that's the highest rate applied to any of your income; but as a percentage of the whole $100,000, your tax is about 22.37%.

This next calculator lets you try it out with your own numbers:

Tax Year:
Filing Status:
Taxable Income: $
  ...as a percentage of income: %
Tax Bracket: %

"Taxable Income" here is really Regularly Taxed Income minus Adjustments, Deductions, and Exemptions. Payroll Tax (Social Security and Medicare), and Qualified Dividends and Long Term Capital Gains are separate calculations. See this Tax Calculator for more.

Tax Hikes, Tax Cuts

1993 saw a tax hike on the wealthy (via two new brackets at the top), and then 2001 through 2003 saw a series of tax cuts that lowered the tax brackets as follows:

  1992   1993 -
  2001  2002  2003 -
  2011 -
15% 15% 15% 10% 10%Same
15% 15% 15%
28% 28% 27.5% 27% 25% 25%
31% 31% 30.5% 30% 28% 28%
36% 35.5% 35% 33% 36%
39.6% 39.1% 38.6% 35% 39.6%

From 2000 to 2002 most brackets dropped by one percent, and there was a new low bracket added for the "lucky duckies" at the very bottom. In 2003 most brackets got an additional cut of two percent with a special gift for the "other" lucky duckies, the ones at the top. But note that the rich still paid more in 2003, and everybody else paid less, than was the case in 1992. Now if we could just balance the budget...

Future Tax Rates

As of early 2009, the plan for the future was to leave the lower tax brackets alone, and raise the top two brackets to where they were during the 1990s. The cutoffs for the top brackets were to be raised, so that singles making above $200,000 annually, or families making above $250,000, would be the ones affected by the higher rates.

As of August 2010, Congress still hasn't made those changes legal. If Congress doesn't act before New Year's, all brackets will automatically revert to where they were in 2000, meaning a big tax increase for everybody. But hopefully Congress won't really do nothing, they'll just follow the path of least political resistance, and temporarily freeze all brackets at their current levels until after the 2012 elections. (You heard it here first!)

(Update, December 2010: The prediction above came true! All tax brackets will be frozen through 2012.)