Calculating income tax can cause major headaches; the amount you owe depends on how you file your return, what (and how much) income you earn, and which tax breaks you qualify for. Plus, the U.S. tax code seems to be in a constant state of flux, which makes it even harder for taxpayers to remain compliant with the ever-changing tax law.
It’s smart to estimate how much tax you’ll owe the federal government, but unless you know how to navigate the complex sea of tax code, dialing down an accurate bill is no easy task. Take advantage of our easy-to-use income tax calculator to plan and make sure you’re prepared when Uncle Sam comes knocking around tax season.
The Federal Income Tax
President Trump passed the Tax Cuts and Job Act (TCJA) in 2017, most of which is effective between 2018 and 2025. The IRS recently began implementing changes written within this tax legislation that is sure to affect most individuals, families, and businesses.
The U.S. tax calculator is progressive, meaning the more you earn, the more you pay. Under the most recent update, high-income earners will see a decreased tax rate, which lowers their overall tax bill and helps keep more money in their pocket.
If you’re not sure how recent updates to legislation may affect your personal circumstances, use our federal income tax calculator to check whether your estimated tax bill is higher or lower than previous years. Don’t like what you see?
Enter the total amount of your itemized deduction (if you believe it to be greater than the standard deduction available to you)
If you’re wondering “How much tax will I owe?”, our tool can take these five variables into account and calculate your tax bracket to display the corresponding tax rate applicable to your adjusted gross income (AGI).
Talk to an expert at Community Tax who can show you how to make the most of the new tax code on your return.
Recent Reform Under the Tax Cuts and Jobs Act (2017)
Under Trump's tax reform plan, marginal tax rates currently (2019) range from 10% to 37% depending on your income and filing status. This is lower than previous legislation implemented by the Obama administration in which the marginal tax rate went up to 39.6%.
2019 Tax Brackets
$0 - $9,700
$9,701 - $39,475
$19,401 - $78,950
$39,476 - $84,200
$78,951 - $168,400
$84,201 - $160,725
$168,401 - $321,450
$160,726 - $204,100
$321,451 - $408,200
$204,101 - $510,300
$408,201 - $612,350
Tax Bracket Calculator
U.S. tax brackets might seem deceptively easy to read, but they’re not as easy to interpret. Calculating federal tax is more complex than just taking your income, seeing what bracket your earnings place you in, and multiplying it by your tax rate.
When estimating income tax, you need to understand the difference between the marginal tax rate and the effective tax rate. Currently, the TCJA divides, taxpayers into seven different brackets which represent your marginal tax rate:
10%, 12%, 22%, 24%, 32%, 35%, 37%
This does not mean that if you fall into the third tax bracket, for example, you must hand 22% of your taxable income over to the federal government; rather, you would only pay 22% of the bracket’s maximum amount.
Let’s take a look at how a tax calculator works in action...
Say you’re a single filer and you earn $45,000 in annual income
You decide to take the standard deduction of $12,000 on your tax return
Your lower AGI drops you from the third bracket into the second (12%) tax bracket
The maximum AGI for the first bracket (10% marginal tax rate) is $9,525
You decide to take the standard deduction of $12,000 on your tax return
You pay an additional 12% on $23,475, the remaining portion of your taxable income outside of the first bracket ($33,000 - $9,525)
So, a tax calculator would show you the sum of the 10% paid on the first $9,525 ($952.50), plus the 12% taxed onto the remaining income ($2,817). In this case, your estimated bill for federal income tax would be $3,769.50.
*Note: This figure does not account for property tax, state tax, local tax, or FICA tax you may need to report on your return.
Think of the tax brackets as “pockets” that you place your money into. The first pocket can only hold $9,525 and any money that goes in there is taxed at a top marginal 10%. If you need to use the second pocket, whatever leftover amount held therein is taxed at 12%.
Those who make $38,701 or more will need to jump to the third “pocket” for the money that doesn’t fit within the first two, and anything held there is taxed at 22%—until you fill it by earning more than $82,500, in which case you’ll need to move up to the next space, and so on.
Effective tax rate, on the other hand, refers to the percentage of your actual income that you owe the IRS in taxes. Working with the example above, you could use a tax calculator to divide your annual income ($45,000) by your overall liability of $3,769.50—except the IRS rounds up, so this number would become $3,770. The end equation ($45,000 / $3,770) would display your effective tax rate of 11.94%.
When calculating federal taxes, remember that the marginal tax rate is the highest tax that applies to a portion of your income; the effective tax rate is the actual percentage of your pre-taxed income that you pay to the IRS. But what income is considered “taxable” under the federal tax code? Let’s discuss that next.
Before estimating how much tax you owe, you first need to calculate the amount of your taxable income in the eyes of the IRS. The federal government assesses different tax, at different rates, on different types of income. Some forms of income, such as certain retirement plan distributions or alimony payments, are nontaxable and exempt from federal income tax.
*The IRS describes the difference between taxable income and nontaxable income in further detail withinPublication 525.
What counts as taxable income?
The IRS states that income may be in the form of money, property, or services which you receive within a given tax year. However, if you hold a salaried job, side hustle, investment account(s), or receive some other form of income, calculating how much tax you have to pay—and on which sources—can prove rather tricky.
The first differentiation is between “earned” and “unearned” income, which are taxed at different rates.
Types of Earned Income
This includes all taxable income you receive from working or from certain disability payments.
All earned compensation income must be reported on your tax return, including:
Wages, salaries, tips, commissions, and other taxable employee pay
Union strike benefits
Long-term disability benefits (received prior to minimum retirement age)
Nontaxable combat pay (if you choose to have this included towards your earned income tax credit, then the amount should be shown in box 12 of your IRS Form W-2)
Fringe benefits for services rendered might not seem like traditional “income”, but many are considered taxable and should, therefore, factor into your overall income tax calculation. This is true even if someone else, such as your spouse, receives the benefit or perk such as:
Awards or prizes
Holiday gifts (such as cash or gift certificates)
Clothing that’s suitable for street wear
Company-paid gym membership
Types of Unearned Income
Your earned income tax is calculated by the top marginal tax rate according to your tax bracket, but the unearned income you receive can affect which bracket you’re placed in.
Unearned income typically refers to money from prior work performed or investments made. Some common sources examples include:
Annuities, pensions, and other periodic payments (such as unemployment benefits)
Dividends, interest, and certain royalties
Social Security, disability, and veterans benefits
Gifts and inheritances
Certain taxable prizes
The good news is that unearned income is not subject to payroll taxes, meaning you won’t have to contribute to Social Security or Medicare with these earnings. However, your unearned income does add to your AGI in the federal tax calculator, which may then place you into a higher tax bracket.
Many sources of unearned income are taxed at your marginal tax rate, such as pension income or interest from savings accounts. However, taxpayers enjoy breaks on the tax rate for certain types of unearned income, such as capital gains and qualified dividends.
*Note: The difference between earned and unearned income (including how each is taxed) may vary by state. For example, the New York tax code does not consider pension payments as income.
Did you know?
Did you know that you might be required to pay federal income tax on your child’s unearned income for interest or dividends held in their name due to what’s known as the “kiddie tax”?
Enlist our tax preparation service to ensure you fulfill all of your financial obligations—and never pay a cent more than necessary.
Once you’ve added up all sources of earned and unearned income, you’ll have your total gross income for the tax year. If you’re not sure whether or not you have to pay tax on your gross income, take a look at the chart of minimum income requirements for 2019 displayed below.
If your filing status is...
AND at the end of 2018 you were...*
THEN file a return if your gross income was at least...**
65 or older
head of household
65 or older
married, filing jointly
under 65 (both spouses)
65 or older (one spouse)
65 or older (both spouses)
married, filing separately
65 or older
But remember: only your adjusted gross income is taxed by the IRS. To calculate your AGI, you’ll need to add up your federal exemptions, deductions, and tax credits. Let’s break it down.
How to Calculate Federal Exemptions and Deductions
As of 2018, you can no longer claim a personal exemption deduction for yourself, your spouse, or your dependents on your tax return; this once-popular exemption is suspended under the TCJA until 2025 and is described in detail by IRS Publication 501.
Fortunately, most taxpayers qualify for a federal income tax deduction which reduces a percentage of your taxable income—and thereby lowers your overall tax bill.
The standard deduction on your federal income tax return is a dollar amount that reduces your overall taxable income. It’s a benefit offered by the IRS to taxpayers who don’t want to itemize actual deductions, as it allows you to deduct a portion of your taxable income without backing up your claim using supporting evidence, documents, and/or receipts for qualifying expenses.
So long as you qualify, the standard deduction amount for most people (those who are not blind, elderly, or listed as a dependent) is displayed in the table below.
IF your filing status is...
YOUR standard deduction is...
Single or Married filing separately...
$12,000 (formerly $6,350)
Married filing jointly or Qualifying widow(er)
$24,000 (formerly $12,700)
Head of household
$18,000 (formerly $9,350)
As you can see, the new standard deduction is almost doubled under the new law, allowing you to reduce your taxable income by $5,650, $11,300, or $8,650 respectively. This large deduction may place you in a lower tax bracket with a lower tax rate.
What is an itemized deduction?
The federal standard deduction is a fixed dollar amount—determined by your age and filing status—which the IRS allows you to remove (deduct) from your taxable income, but taxpayers also have the option to list (itemize) qualifying deductible expenses on Schedule A of IRS Form 1040.
In the past, certain high-income earners were limited in the amount of itemized deductions they could claim, but this limit has been suspended under the TCJA. However, nearly all taxpayers who previously claimed an itemized deduction (regardless of their income level) will be affected by new modifications introduced by this tax reform.
Medical and Dental Expenses
If you have unreimbursed medical and dental expenses that you paid for you, your spouse, or your dependent(s), you may be able to deduct the amount that exceeds 7.5% of your AGI. Deductible medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.
Your total deduction for eligible taxes cannot exceed $10,000 ($5,000 if married filing separately). According to IRS Topic No. 503, there are four types of deductible non-business taxes:
State and local income taxes withheld from your wages will appear on your IRS Form W-2 (unless you live in a state that does not impose an income tax, such as Alaska, Florida, Nevada, South Dakota, or Wyoming). However, you can either elect to deduct this income tax or the state and local general sales tax—not both.
Taxes that are not eligible for itemized deduction include transfer taxes on the sale of property, estate and inheritance taxes, homeowners association fees, and service charges for water, sewer, or trash collection.
In order to be itemized, your charitable contribution must go to a qualified organization; contributions to individuals are not deductible. If you donate property rather than cash, check, or other monetary gift, you must fill out
Form 8283 for noncash contributions over $500. Cash or property contributions made after August 27, 2018, must be reduced on Schedule A by the amount of the state or local tax credit you expect to receive in return.
Home Mortgage Points
“Points” are prepaid interest and may be deductible on your federal income tax return. You can deduct home mortgage points in full in the year you pay for them, so long as you meet the requirements discussed in Topic No. 504.
In addition to qualified mortgage interest, you may also list investment interest as an itemized deduction (limited to your net investment income). Student loan interest may adjust your taxable income elsewhere on Form 1040.
Summary of Itemized Deductions
These are a few of the most common itemized deductions, but there are a number of additional, miscellaneous expenses which you might be able to write off. To save the most money, you should claim the larger of your itemized deduction(s) or the standard deduction, as you cannot file both.
For example, unless you’re a single filer with over $12,000 in qualified, itemized deductions (with proof of those expenses) it’s wiser to simply claim the standard deduction. Ask an expert at CommunityTax for advice on the best filing strategy and the lowest possible tax bill.
How to Calculate Federal Tax Credits
Whereas tax deductions reduce a portion of your overall taxable income, tax credits are different because they reduce your tax liability dollar-for-dollar. Say that after you claim your tax deduction, your calculated federal income tax amounts to $5,000; if you are eligible to claim $1,500 in tax credits, then your bill would be reduced to $3,500.
As you learn how to calculate taxes, it’s important to understand the difference between refundable tax credits and nonrefundable tax credits. The latter will give you a tax refund only up to the amount you owe, but nothing more. Refundable tax credits, however, get you a refund even if it’s more than what you owe. If you qualify for a refundable credit that is greater than the total tax you owe, you will receive a refund for the difference.
There are a vast number of tax credits which you may be eligible to claim, spanning umbrella categories for families, dependents, homeownership, healthcare, education, income, and savings.
An experienced Community Tax agent will ensure you receive every tax credit you’re entitled to, leaving no money on the table.
Common Tax Credits Available under the Tax Cuts and Jobs Act
Family & Dependents
Child and Dependent Care Credit
Child Tax Credit
Credit for the Elderly or Disable Credit
Premium Tax Credit
Health Coverage Tax Credit
Income & Savings
Earned Income Tax Credit (EITC)
Residential Energy Efficiency Credit
Low-Income Housing Credit
American Opportunity Credit
Lifetime Learning Credit
How to Calculate Your Tax Refund
Let’s clear the air. Although you may be required to file a tax return, it does not automatically follow that you’ll be entitled to a tax refund. You can calculate your tax refund by taking your total amount withheld for federal income tax and subtracting it by the total federal income tax you owe for the year.
If the amount you paid (withheld) throughout the year is more than what you owe, you’re entitled to a refund of the difference. If the amount you paid is less than your overall tax liability, you’ll need to pay to cover the difference.
So how do you know if you paid too much or too little? Good question; many clients come to us and ask “How can I estimate my tax return?”. To provide an accurate answer, we first need to look at the amount of your withholding, or how much is kept from your paycheck issued by an employer. This amount is determined by the information you provide on IRS Form W-4, which estimates how much tax you’ll be responsible for throughout the year.
You might take a look at your paycheck and think, “Wait a second—I’m in the ___% bracket, clearly my employer is withholding far more than that!” And you’re correct. That’s because not all of your federal tax withheld goes toward income tax; a large portion of earnings are also withheld for Social Security tax (6.2%), Medicare tax (1.45%), and in many cases, state income tax.
That means you pay nonrefundable 7.65% in federal taxes before you even begin to pay federal income tax; to calculate your federal tax refund, you’ll need to separate these withholdings from your income tax withheld.
Here’s an example:
Your employer withheld $7,500 in taxes. $573.75 (7.65%) went to Social Security and Medicare; your state does not charge income tax, meaning $6,926.25 went to the IRS for federal income tax. However, your total tax liability, after claiming your standard deduction and tax credits, only amounts to $6,100. You can therefore calculate a tax refund of $826.25.
Paying Your Taxes
The government wants to ensure they get paid, which is why they automatically withhold taxes from wages on your paycheck and subject many taxpayers to backup withholding. If your W-4 is accurately filed, you should have enough withheld from each paycheck that you do not need to pay additional taxes before the April 15 deadline.
*Note: Self-employed individuals who earn $400 or more within a given tax year must submit quarterly estimated tax payments.
With tax monitoring from Community Tax, you can feel confident knowing that you’re in the green and in good standing with the IRS—because the last thing anyone wants is a surprise tax bill that wipes their savings clean or, worse yet, sends them into debt due to back taxes.
Whether you want to remain tax compliant throughout the year or you find yourself in need of tax resolution, our team of professionals can help you calculate your income tax, take control of your finances, and fulfil your federal tax obligation.
State and Local Income Taxes
Remember that most states (and some local governments) impose their own income tax. In addition to our federal tax calculator, refer to our state income tax calculator for a full picture of your overall liability.
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