What is Federal Income Tax?

The United States government levies federal income tax on the income of individuals, businesses, and other entities. It is a progressive tax, meaning the tax rate increases as income increases. The federal income tax system is based on a set of tax brackets, which determine the amount of tax owed based on income.

Taxpayers must file an annual tax return with the Internal Revenue Service (IRS) that reports their income and calculates the amount of tax owed. The funds collected from federal income taxes fund government programs and services, including national defense, infrastructure, social welfare programs, and more.

How Much is Federal Income Tax?

The amount of federal income tax owed depends on several factors, including an individual’s or business’s income, filing status, deductions, and credits. The federal income tax system is structured with a series of tax brackets determining the tax rate applied to different income levels.

The tax rates for the 2021 tax year (taxes filed in 2022) are as follows:

  • 10% on income up to $9,950
  • 12% on income between $9,951 and $40,525
  • 22% on income between $40,526 and $86,375
  • 24% on income between $86,376 and $164,925
  • 32% on income between $164,926 and $209,425
  • 35% on income between $209,426 and $523,600
  • 37% on income over $523,600

Note that this is a simplified view of the tax system, and other factors, such as deductions and credits, can affect the amount of tax owed. It’s best to consult with a tax professional or use tax software to calculate the exact amount of federal income tax owed.

Also, See: Internal Revenue Service (IRS)

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