A rate schedule is a chart that helps United States

United States

The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 taxpayers determine their federal income tax

Income tax

An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...

 burden for a particular year. Another name for “rate schedule” is “rate table.”

Origin

The origin of the current rate schedules is the Internal Revenue Code

Internal Revenue Code

The Internal Revenue Code is the domestic portion of Federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 of the United States Code...

 of 1986 (IRC), which "is the official name for Title 26 of the United States Code

United States Code

The Code of Laws of the United States of America is a compilation and codification of the general and permanent federal laws of the United States...

." With that law, the U.S. Congress created four types of rate tables, all of which are based on a taxpayer’s filing status (e.g., “married individuals filing joint returns,” “heads of households").

Each year the United States Internal Revenue Service

Internal Revenue Service

The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...

 (IRS) updates rate schedules in accordance with guidelines that Congress established in the IRC. In general, the IRS bases such adjustments on inflation

Inflation

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 and cost of living increases in the previous year.

Format

All rate schedules have an identical format, containing four columns and six rows (called “brackets”). The first two columns indicate the range of taxable income

Taxable income

Taxable income refers to the base upon which an income tax system imposes tax. Generally, it includes some or all items of income and is reduced by expenses and other deductions. The amounts included as income, expenses, and other deductions vary by country or system. Many systems provide that...

that a taxpayer must have to qualify for a particular tax rate. The third column indicates the tax rate itself. The fourth column gives the range of income to which the current marginal rate applies.

Given that Congress has prescribed a system of progressive taxation, all but the lowest-earning taxpayers pay distinct rates for different parts of their income.

The following are the IRS rate schedules for 2011:



Schedule X — Single

If taxable income is over--	But not over--	The tax is:	of the amount over--
$0	$8,500	10%	$0
$8,500	$34,500	$850.00 + 15%	$8,500
$34,500	$83,600	$4,750.00 + 25%	$34,500
$83,600	$174,400	$17,025.00 + 28%	$83,600
$174,400	$379,150	$42,449.00 + 33%	$174,400
$379,150		$110,016.50 + 35%	$379,150

Schedule Y-1 — Married filing Jointly or Qualifying Widow(er)

If taxable income is over--	But not over--	The tax is:	of the amount over--
$0	$17,000	10%	$0
$17,000	$69,000	$1,670.00 + 15%	$17,000
$69,000	$139,350	$9,350.00 + 25%	$69,000
$139,350	$212,300	$26,637.50 + 28%	$139,350
$212,300	$379,150	$46,741.50 + 33%	$212,300
$379,150		$100,894.50 + 35%	$379,150

Schedule Y-2 — Married Filing Separately

If taxable income is over--	But not over--	The tax is:	of the amount over--
$0	$8,500	10%	$0
$8,500	$34,500	$850.00 + 15%	$8,500
$34,500	$69,675	$4,750.00 + 25%	$34,500
$69,675	$106,150	$13,543.75 + 28%	$69,675
$106,150	$189,575	$23,756.75 + 33%	$106,150
$189,575		51,287.00 + 35%	$189,575

Schedule Z — Head of Household

If taxable income is over--	But not over--	The tax is:	of the amount over--
$0	$12,150	10%	$0
$12,150	$46,250	$1,215.00 + 15%	$12,150
$46,250	$119,400	$6,330.00 + 25%	$46,250
$119,400	$193,350	$24,617.50 + 28%	$119,400
$193,350	$379,150	$45,323.50 + 33%	$193,350
$379,150		$106,637.50 + 35%	$379,150

Caution: These tables shown above are accurate for 2011 only and do not apply for any other year.

Use of Rate Schedules

To use a rate schedule, a taxpayer must know their filing status and amount of taxable income. Definitions related to one’s filing status can be found in IRC § A.2(a-b), and general guidelines regarding taxable income are described in IRC § A.63(a-b). Once a taxpayer has made these determinations, he (1) references the pertinent rate schedule, (2) finds the appropriate bracket (based on her taxable income), and (3) uses the formula described in the third column to determine his federal income tax.

Assume, for example, that Taxpayer A is single and has a taxable income of $175,000 in 2011. The following steps apply the procedure outlined above:

(1) Because he is single, the pertinent rate table is Schedule X.

(2) Given that his income falls between $174,400 and $379,150, he uses the fifth bracket in Schedule X.

(3) His federal income tax will be “$42,449.00 plus 33% of the amount over
174,400.” Applying this formula to Taxpayer A, one arrives at the
following result:

$42,449.00 + (0.33 * ($175,000 - $174,400)) =

$42,449.00 + (0.33 * $600) =

$42,449.00 + $198.00 = $42,647.00.

Accordingly, Taxpayer A must pay $42,647.00 in federal income taxes for 2011.