For federal income tax purposes, the amount of income that is taxable, known as "taxable income," is not taxed at a single rate. Instead, it is subject to a progressive tax system, meaning different portions of your taxable income are taxed at increasing rates. This system determines how much of your income falls into various tax brackets, each with its own corresponding tax rate.
Understanding Taxable Income
Before applying tax rates, it's important to differentiate between your gross income and your taxable income. Taxable income is generally your gross income (all income from wages, investments, etc.) minus any allowed deductions and exemptions. These deductions can significantly reduce the portion of your income that is subject to federal income tax.
Federal Income Tax Rates and Brackets for a Single Taxpayer (2023)
For a single taxpayer in 2023, specific portions of their taxable income are subject to the following federal income tax rates:
| Tax Rate | On Taxable Income From . . . | Up To . . . |
|---|---|---|
| 10% | $0 | $11,000 |
| 12% | $11,001 | $44,725 |
| 22% | $44,726 | $95,375 |
| 24% | $95,376 | $182,100 |
| 32% | $182,101 | $231,250 |
| 35% | $231,251 | $578,125 |
| 37% | $578,126 | No Limit |
Note: These rates apply to your taxable income, which is calculated after accounting for deductions and adjustments to your gross income.
How Progressive Taxation Works
The progressive tax system means you don't pay the highest rate on all your income. Instead, each portion of your taxable income is taxed at its corresponding bracket rate.
Here's an example:
Let's say a single taxpayer has a taxable income of $50,000 in 2023. Their federal income tax liability is calculated as follows:
- First portion (10% bracket): The first $11,000 is taxed at 10%.
- $11,000 * 0.10 = $1,100
- Second portion (12% bracket): The income from $11,001 up to $44,725 (a range of $33,725) is taxed at 12%.
- ($44,725 - $11,000) * 0.12 = $33,725 * 0.12 = $4,047
- Third portion (22% bracket): The remaining income from $44,726 up to $50,000 (a range of $5,275) is taxed at 22%.
- ($50,000 - $44,725) * 0.22 = $5,275 * 0.22 = $1,160.50
The total tax liability for this individual would be the sum of these amounts: $1,100 + $4,047 + $1,160.50 = $6,307.50.
This example illustrates that "how much of income is taxable" is not a single percentage or amount applied universally, but rather a tiered system where different segments of your taxable income are subject to varying rates. Understanding these brackets is crucial for estimating your tax obligations.
