Income Tax Rate

New Tax Rates for 2015

For the year 2015, there is a new top tax bracket of 39.6%.

There are also two new surtaxes starting in 2015:

  • An additional Medicare tax of 0.9% on wages and self-employment income, and
  • A net investment income tax of 3.8% on the lower of modified adjusted gross income or net investment income.

Both of these new taxes apply to individuals earning more than $200,000 (for single filers) or $250,000 (for married filing jointly).

Taxpayers in the highest tax bracket of 39.6% potentially face a combined 43.4% (39.6% + 3.8%) marginal tax rate on their income.

Other Tax Rates are Also Changing

  • The Social Security tax has reverted back to its normal rate of 12.4% (it had been at 10.4% for 2011 and 2012).
  • The Medicare tax remains at 2.9%, plus there’s an additional Medicare tax of 0.9% on wages and self-employment over a threshold amount.
  • The capital gains tax rates have a new 20% top rate. There are now three tiers of tax rates on capital gains and qualified dividends: 0%, 15%, and 20%. (Capital gains could also be subject to the new net investment income tax of 3.8%, making the top rate on long-term gains effectively 23.8% combined.)
  • The alternative minimum tax rates remain at 26% and 28%.

The Federal Income Tax Rates

The following tax rates apply to ordinary income. That is, these tax rates apply to most types of income. Special rates apply to specific types of income such as long-term capital gains and qualified dividends.

Each tax rate applies to a specific range of taxable income, which is called a tax bracket. Taxable income is total worldwide income after various deductions have been subtracted.

Note: These tax rate schedules are provided for tax planning purposes. To compute your actual income tax, please see the 2015 Instructions for Form 1040 and the 2015 Tax Tables.

 

Single Filing Status

[Tax Rate Schedule X, Internal Revenue Code section 1(c)]

  • 10% on taxable income from $0 to $8,925, plus
  • 15% on taxable income over $8,925 to $36,250, plus
  • 25% on taxable income over $36,250 to $87,850, plus
  • 28% on taxable income over $87,850 to $183,250, plus
  • 33% on taxable income over $183,250 to $398,350, plus
  • 35% on taxable income over $398,350 to $400,000, plus
  • 39.6% on taxable income over $400,000.

Married Filing Jointly or Qualifying Widow(er) Filing Status

[Tax Rate Schedule Y-1, Internal Revenue Code section 1(a)]

  • 10% on taxable income from $0 to $17,850, plus
  • 15% on taxable income over $17,850 to $72,500, plus
  • 25% on taxable income over $72,500 to $146,400, plus
  • 28% on taxable income over $146,400 to $223,050, plus
  • 33% on taxable income over $223,050 to $398,350, plus
  • 35% on taxable income over $398,350 to $450,000, plus
  • 39.6% on taxable income over $450,000.

Married Filing Separately Filing Status

[Tax Rate Schedule Y-2, Internal Revenue Code section 1(d)]

  • 10% on taxable income from $0 to $8,925, plus
  • 15% on taxable income over $8,925 to $36,250, plus
  • 25% on taxable income over $36,250 to $73,200, plus
  • 28% on taxable income over $73,200 to $111,525, plus
  • 33% on taxable income over $111,525 to $199,175, plus
  • 35% on taxable income over $199,175 to $225,000, plus
  • 39.6% on taxable income over $225,000.

Head of Household Filing Status

[Tax Rate Schedule Z, Internal Revenue Code section 1(b)]

  • 10% on taxable income from $0 to $12,750, plus
  • 15% on taxable income over $12,750 to $48,600, plus
  • 25% on taxable income over $48,600 to $125,450, plus
  • 28% on taxable income over $125,450 to $203,150, plus
  • 33% on taxable income over $203,150 to $398,350, plus
  • 35% on taxable income over $398,350 to $425,000, plus
  • 39.6% on taxable income over $425,000.

 

How to Utilize your Marginal Tax Rates

Individuals can use the tax rate schedules in a number of ways to help plan their finances. You can use these tax rates to figure out how much tax you will pay on extra income you earn. For a taxpayer in the 25% tax bracket, extra income will be taxed at that rate until the taxpayer reaches the next tax bracket of 28%.

Remember that different intervals of income are taxed at different rates, and the income intervals at which the rates apply are slightly different based on a person’s filing status. For example, a person who files as Head of Household earning $48,600 per year would have the first $12,750 of their taxable income taxed at the 10% rate, and their taxable income between $12,750 and $48,600 taxed at the 15% rate. A Head of Household filer earning $200,000 a year would fall within the 28% tax bracket, although some of their income is taxed at the 10%, 15%, and 25% rates.

Alternatively, you can use these tax rates to figure out how much tax you will save by increasing your deductions. A taxpayer in the 28% tax bracket, for example, will save 28 cents in federal tax for every dollar spent on a tax-deductible expense, such as mortgage interest or charity.

Be aware that marginal tax rates interact with other tax rates, especially the alternative minimum tax, which can push income into a higher tax rate or eliminate the tax savings of certain types of deductions.

Source: the official tax brackets for 2015 were published by the Internal Revenue Service.