Your federal tax bracket is the one which tells you an estimate of how much tax you will need to pay. To determine this, you must first figure out how you want to file your taxes before you proceed with the calculations. Read on to know the steps on how to determine your federal tax bracket.
Know your tax status
This one could be easy for the singles out there. For married couple with kids, you need to remember your tax status and check if you have updated it already. Keep in mind that the status you’ve chosen will be a basis for your tax bracket and tax deductions as well. Better count your children and check how many have been declared on your tax profile.
Compute your annual gross income
Check your payslip or request for the income tax return from your human resources department. Find the amount that you have earned for the year to get a best-case estimate. The next step to get your annual gross income is by figuring out the deductions. If your expenses will be the same as this year’s you can do a general estimate based on last year’s tax return. Otherwise, figure out your standard deduction.
Determine your exemptions
If you are single, you’ll have a lesser tax exemption amount. This also depends on the year’s personal exemption table.
Figure out the taxable income
Now that you have all figures with you which are the annual gross income, deductions and exemptions, you can now proceed with a little calculation. Subtract all deductions and personal exemption from your gross income. The result would be your taxable income which is an important item on figuring out your tax bracket.
Determine your tax bracket
Search and download the current tax table of IRS. You will use this as a lookup tool to figure out the amount of your tax bracket. After you have come up with the total taxable income, refer to the tool and see the amount that would fall under the amount of taxable income. You just have to check where the taxable income and filing status meets and you’ll see the tax amount. In each of the bracket you’ll see in IRS, there is a minimum amount of tax that you must pay.
This activity can be done every year. If you decided on doing this again, make sure to refer to the new processes that will be implemented in the future along with the new tax table that the government will come up with.