Estimate Your Tax Bracket - Fidelity (2024)

FAQs

How do I figure out my tax bracket? ›

The term "tax bracket" refers to the income ranges with differing tax rates applied to each range. When figuring out what tax bracket you're in, you look at the highest tax rate applied to the top portion of your taxable income for your filing status.

You determine your tax bracket in retirement the same way you did while you were working. Add up your sources of taxable income, subtract your standard or itemized deductions, apply any tax credits you're eligible for, and check the tax tables in the instructions for Form 1040 and 1040 SR.

Let's take a look at an example. Let's say for the 2023 tax year (filing for 2024), you earned a taxable income of $90,000, and you filed as single. Based on the tax brackets, you'll fall under the third tax bracket for taxable incomes between $44,725 and $95,375, which has a tax rate of 22%.

If you make $80,000 a year living in the region of California, USA, you will be taxed $21,763. That means that your net pay will be $58,237 per year, or $4,853 per month.

If you make $70,000 a year living in the region of California, USA, you will be taxed $17,665. That means that your net pay will be $52,335 per year, or $4,361 per month. Your average tax rate is 25.2% and your marginal tax rate is 41.0%.

To figure your estimated tax, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year. When figuring your estimated tax for the current year, it may be helpful to use your income, deductions, and credits for the prior year as a starting point.

The more money you withdraw from your 401(k), the more income you'll have—and the larger your tax bill. More income can also mean a higher tax bracket and tax rate, so plan your distributions carefully.

You pay tax as a percentage of your income in layers called tax brackets. As your income goes up, the tax rate on the next layer of income is higher. When your income jumps to a higher tax bracket, you don't pay the higher rate on your entire income.

Instead, your $100,000 will be taxed at a marginal tax rate so that only some of your income is taxed at the maximum rate for your income that year (24%). The rest of your income is taxed at the federal income rates below 24%, i.e., 10%, 12%, and 22%.

Are tax brackets based on gross or net income? ›

Taxable income starts with gross income, then certain allowable deductions are subtracted to arrive at the amount of income you're actually taxed on. Tax brackets and marginal tax rates are based on taxable income, not gross income.

Your tax bracket depends on your taxable income and your filing status: single, married filing jointly or qualifying widow(er), married filing separately and head of household. Generally, as you move up the pay scale, you also move up the tax scale.

$80,000 is a good salary, depending on the affordability of where you live. Living in a metropolitan area with a high cost of living on a salary like this can be challenging, but it may be easier in more suburban or rural areas.

You can increase the amount of your tax refund by decreasing your taxable income and taking advantage of tax credits. Working with a financial advisor and tax professional can help you make the most of deductions and credits you're eligible for.

Tax brackets and marginal tax rates are based on taxable income, not gross income.

Simply stated, it's three steps. You'll need to know your filing status, add up all of your sources of income and then subtract any deductions to find your taxable income amount.

The IRS looks at how much total income you have received in the tax year and that is how they determine your tax bracket.