Tax bracket
Encyclopedia
Tax brackets are the divisions at which tax rates change in a progressive tax
Progressive tax
A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate...

system (or an explicitly regressive tax
Regressive tax
A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, where the average tax rate exceeds the...

system, although this is much rarer). Essentially, they are the cutoff values for taxable income — income past a certain point will be taxed at a higher rate.

## Example

Imagine that there are three tax brackets: 10%, 20%, and 30%. The 10% rate applies to income from \$1 to \$10,000; the 20% rate applies to income from \$10,001 to \$20,000; and the 30% rate applies to all income above \$20,000.

Under this system, someone earning \$10,000 would be taxed at a rate of 10%, paying a total of \$1,000. Someone earning \$5,000 would pay \$500, and so on.

Meanwhile, someone earning \$35,000 would face a more complicated calculation. The rate on the first \$10,000 would be 10%; the rate from \$10,001 to \$20,000 would be 20%; and the rate above that would be 30%. Thus, he would pay \$1,000 for the first \$10,000 of income; \$2,000 for the second \$10,000 of income; and \$4,500 for the last \$15,000 of income; in total, he would pay \$7,500, or about 21.4%.

## Tax brackets in Australia

The 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...

is administered by the Federal government in Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

. The Australian Taxation Office publishes individual income tax rates for previous years.

### 2007–2008

The Federal budget in May 2007 http://www.treasurer.gov.au/tsr/content/pressreleases/2007/034.asp announced new tax rates for the 2007-2008 financial year. They are as follows :
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...

Tax on this income
\$0 – \$6,000 Nil
\$6,001 – \$30,000 15c for each \$1 over \$6,000
\$30,001 – \$75,000 \$3,600 plus 30c for each \$1 over \$30,000
\$75,001 – \$150,000 \$17,100 plus 40c for each \$1 over \$75,000
Over \$150,000 \$47,100 plus 45c for each \$1 over \$150,000

Again, the tax brackets do not include the 1.5% Medicare levy. All figures are in Australian dollar
Australian dollar
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...

s.

### 2008–2009

The Federal budget in May 2008 http://www.budget.gov.au/ announced new tax rates for the 2008-2009 financial year. They are as follows :
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...

Tax on this income
\$0 – \$6,000 Nil
\$6,001 – \$34,000 15c for each \$1 over \$6,000
\$34,001 – \$80,000 \$4,200 plus 30c for each \$1 over \$34,000
\$80,001 – \$180,000 \$18,000 plus 40c for each \$1 over \$80,000
Over \$180,000 \$58,000 plus 45c for each \$1 over \$180,000

Again, the tax brackets do not include the 1.5% Medicare levy. All figures are in Australian dollar
Australian dollar
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...

s.

### 2009–2010

The Federal budget in May 2009 http://www.budget.gov.au/ announced new tax rates for the 2009-2010 financial year. They are as follows :
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...

Tax on this income
\$0 – \$6,000 Nil
\$6,001 – \$35,000 15c for each \$1 over \$6,000
\$35,001 – \$80,000 \$4,350 plus 30c for each \$1 over \$35,000
\$80,001 – \$180,000 \$17,850 plus 38c for each \$1 over \$80,000
Over \$180,000 \$55,850 plus 45c for each \$1 over \$180,000

Again, the tax brackets do not include the 1.5% Medicare levy. All figures are in Australian dollar
Australian dollar
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...

s.

### 2010–2011

The Federal budget in May 2010 http://www.budget.gov.au/ announced new tax rates for the 2010-2011 financial year. They are as follows :
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...

Tax on this income
\$0 – \$6,000 Nil
\$6,001 – \$37,000 15c for each \$1 over \$6,000
\$37,001 – \$80,000 \$4,650 plus 30c for each \$1 over \$37,000
\$80,001 – \$180,000 \$17,550 plus 37c for each \$1 over \$80,000
Over \$180,000 \$54,550 plus 45c for each \$1 over \$180,000

Again, the tax brackets do not include the 1.5% Medicare levy. All figures are in Australian dollar
Australian dollar
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...

s.

Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

's federal government has the following tax brackets for the 2011 tax year (all in Canadian dollars). Note that the "basic personal amount" of \$10,320 effectively means that income up to this amount is not subject to tax, although it is included in the calculation of taxable income.
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...

Tax on this income
\$0 – \$10,320 Nil
\$10,321 - \$41,544 15%
\$41,545 - \$83,088 22%
\$83,089 - \$128,800 26%
Over \$128,800 29%

Each province adds their own tax on top of the federal tax.

Provincial / Territorial Tax Rates for 2011: http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html#provincial

### 2008

Single Rates:
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...

Tax on this income
€0 – €8,150 Nil
€8,151 -€14,000 15%
€14,001 -€19,000 25%
€19,001 &over 35%

Married Rates:
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...

Tax on this income
€0 – €11,400 Nil
€11,401 -€20,500 15%
€20,501 -€28,000 25%
€28,001 &over 35%

### 2009

Single Rates:
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...

Tax on this income
€0 – €8,500 Nil
€8,501 -€14,500 15%
€14,500 -€19,500 25%
€19,500 &over 35%

Married Rates:
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...

Tax on this income
€0 – €11,900 Nil
€11,900 -€21,200 15%
€21,200 -€28,700 25%
€28,700 &over 35%

## Tax brackets in New Zealand

New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...

has the following income tax brackets (as of 1 October 2010). All values in New Zealand dollars, with the ACC Earners' levy not included.
• 10.5% up to \$14,000
• 17.5% from \$14,001 to \$48,000
• 30% \$48,001 to \$70,000
• 33% over \$70,000
• 45% when the employee does not complete a declaration form (IR330)

ACC Earners' Levy for the 2010 tax year is 2.0%, an increase from 1.7% in the 2008 tax year.

### 2007 & 2008

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...

Tax on this income
\$0 – \$20,000 Nil
\$20,001 – \$30,000 3.5c for each \$1 over \$20,000
\$30,001 – \$40,000 \$350 plus 5.5c for each \$1 over \$30,000
\$40,001 – \$80,000 \$900 plus 8.5c for each \$1 over \$40,000
\$80,001 – \$160,000 \$4300 plus 14c for each \$1 over \$80,000
\$160,001 – \$320,000 \$15,500 plus 17c for each \$1 over \$160,000
Over \$320,000 \$42,700 plus 20c for each \$1 over \$320,000

All figures are in Singapore dollar
Singapore dollar
The Singapore dollar or Dollar is the official currency of Singapore. It is normally abbreviated with the dollar sign \$, or alternatively S\$ to distinguish it from other dollar-denominated currencies...

s.

There will be a personal tax rebate of 20% granted for 2008, up to a maximum of \$2,000.

## Tax brackets in South Africa

The Minister of Finance announced new tax rates for the 2011-2012 financial year. They are as follows :

### Tax brackets for the 2011 year of assessment

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...

Tax on this income
R0 – R140,000 18% of every Rand
R140,001 – R221,000 R25,200 plus 25% of the amount above R140,000
R221,001 – R305,000 R45,450 plus 30% of the amount above R221,000
R305,001 – R431,000 R70,650 plus 35% of the amount above R305,000
R431,001 – R552,000 R114,750 plus 38% of the amount above R431,000
R552,001 and over R160,730 plus 40% of the amount above R525,000

### Tax brackets for the 2012 year of assessment

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...

Tax on this income
R0 – R150,000 18% of every Rand
R150,001 – R235,000 R27,000 plus 25% of the amount above R150,000
R235,001 – R325,000 R48,250 plus 30% of the amount above R235,000
R325,001 – R455,000 R75,250 plus 35% of the amount above R325,000
R455,001 – R580,000 R120,750 plus 38% of the amount above R455,000
R580,001 and over R168,250 plus 40% of the amount above R580,000

## Tax Brackets in Switzerland

Personal income tax is progressive in nature. The total rate does not usually exceed 40%.

The Swiss Federal Tax Administration website http://www.estv.admin.ch provides a broad outline of the Swiss tax system, and full details and tax tables are available in PDF documents.

The complexity of the system is partly because the Confederation, the 26 Cantons that make up the federation,
and about 2 900 communes [municipalities] levy their own taxes based on the Federal Constitution and
26 Cantonal Constitutions.

## Tax brackets in the United States

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

, the dollar amounts of the Federal income tax standard deduction
Standard deduction
The standard deduction, as defined under United States tax law, is a dollar amount that non-itemizers may subtract from their income and is based upon filing status. It is available to US citizens and resident aliens who are individuals, married persons, and heads of household and increases every...

and personal exemptions for the taxpayer and dependents are adjusted annually to account for inflation. This results in yearly changes to the personal income tax brackets even when the Federal income tax rates
Rate schedule (federal income tax)
A rate schedule is a chart that helps United States taxpayers determine their federal income tax burden for a particular year. Another name for “rate schedule” is “rate table.”- Origin :...

remain unchanged.

For 2011, the standard deduction
Standard deduction
The standard deduction, as defined under United States tax law, is a dollar amount that non-itemizers may subtract from their income and is based upon filing status. It is available to US citizens and resident aliens who are individuals, married persons, and heads of household and increases every...

is \$5,800 for single individuals and married individuals filing separately (up \$100 from 2010), \$8,500 for heads of household (up \$100), and \$11,600 for married couples filing a joint return (up \$200). The dollar amount of each personal and dependency exemption is \$3,700 (up \$50 from 2010). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes. The Federal income tax brackets for 2009 are as follows:
Marginal Tax Rate Single Married Filing Jointly or Qualified Widow(er) Married Filing Separately Head of Household
10% \$0 – \$8,350 \$0 – \$16,700 \$0 – \$8,350 \$0 – \$11,950
15% \$8,351– \$33,950 \$16,701 – \$67,900 \$8,351 – \$33,950 \$11,951 – \$45,500
25% \$33,951 – \$82,250 \$67,901 – \$137,050 \$33,951 – \$68,525 \$45,501 – \$117,450
28% \$82,251 – \$171,550 \$137,051 – \$208,850 \$68,525 – \$104,425 \$117,451 – \$190,200
33% \$171,551 – \$372,950 \$208,851 – \$372,950 \$104,426 – \$186,475 \$190,201 - \$372,950
35% \$372,951+ \$372,951+ \$186,476+ \$372,951+

Two higher tax brackets (36% and 39.6%) were added in 1993, and then taxes in all brackets were lowered in 2001 through 2003 as follows:
1992 1993–2000 2001 2002 2003–2007
15% 15% 15% 10% 10%
15% 15%
28% 28% 27.5% 27% 25%
31% 31% 30.5% 30% 28%
36% 35.5% 35% 33%
39.6% 39.1% 38.6% 35%

### Internal Revenue Code Terminology

Gross Salary is the amount your employer pays you, i.e., John gets paid \$50/hour as an electrical engineer. His annual gross salary is \$50/hour x 2,000 hours/year = \$100,000/year.

W-2 wages are the wages that appear on the employee’s W-2 issued by his employer each year in January. A copy of the W-2 is sent to the Internal Revenue Service (IRS). It is the Gross Salary less any contributions to pre-tax plans. The W-2 form also shows the amount withheld by the employer for federal income tax.

W-2 Wages = Gross Salary less (contributions to employer retirement plan)
less (contributions to employer health plan)
less (contributions to some other employer plans)

Total Income is the sum of all taxable income, including the W-2 wages. Almost all income is taxable. There are a few exemptions for individuals such as non-taxable interest on government bonds, a portion of the Social Security (SS) income (not the payments to SS, but the payments from SS to the individual), etc.

Adjusted Gross Income (AGI) is Total Income less some specific allowed deductions. Such as; alimony paid (income to the recipient), permitted moving expenses, self-employed retirement program, student loan interest, etc.

Itemized Deductions are other specific deductions such as; mortgage interest on a home, state income taxes or sales taxes, local property taxes, charitable contributions, state income tax withheld, etc.

Standard Deduction is a sort of minimum Itemized Deduction. If you add up all your itemized Deductions and it is less than the Standard Deduction you take the Standard Deduction. In 2007 this was \$5,350 for those filing individually and \$10,700 for married filing jointly.

Personal Exemption is a tax exemption in which the taxpayer can deduct an amount from their gross income for each dependent they can claim. It was \$3,400 in 2007.

### Sample tax calculation

Given the complexity of the United States' income tax code, individuals often find it necessary to consult a tax accountant or professional tax preparer. For example, John, a married 44-year old who has two children, earned a gross salary of \$100,000 in 2007. He contributes the maximum \$15,500 per year to his employer’s 401(k)
401(k)
A 401 is a type of retirement savings account in the United States, which takes its name from subsection of the Internal Revenue Code . A contributor can begin to withdraw funds after reaching the age of 59 1/2 years...

retirement plan, pays \$1,800 per year for his employer’s family health plan, and \$500 per year to his employer’s Flexfund medical expense plan. All of the plans are allowed pre-tax contributions.

Gross pay = \$100,000

W-2 wages = \$100,000 - \$15,500 - \$1,800 - \$500 = \$82,200

John’s and his wife’s other income is \$12,000 from John’s wife’s wages (she also got a W-2 but had no pre-tax contributions), \$200 interest from a bank account, and a \$150 state tax refund.

Total Income = \$82,200 + \$12,000 + \$200 + \$150 = \$94,550.

John’s employer reassigned John to a new office and his moving expenses were \$8,000, of which \$2,000 was not reimbursed by his employer.

Adjusted Gross Income = \$94,550 - \$2,000 = \$92,550.

John’s itemized deduction
Itemized deduction
An itemized deduction is an eligible expense that individual taxpayers in the United States can report on their federal income tax returns in order to decrease their taxable income....

s were \$22,300 (he had some big mortgage interest, property taxes, and state income tax withheld).

John had four personal exemptions—himself, his wife and two children. His total personal exemptions were 4 x \$3,400 = \$13,600.

Taxable Income = \$92,550 - \$22,300 - \$13,600 = \$56,650.

The tax on the Taxable Income is found in a Tax Table if the Taxable Income is less than \$100,000 and is computed if over \$100,000. Both will be used. The Tax Tables can be found in the 2007 1040 Instructions. The Tax Tables list income in \$50 increments for all categories of taxpayers, single, married filing jointly, married filing separately, and head of household. For the Taxable Income range of "at least \$56,650 but less than \$56,700" the tax is \$7,718 for a taxpayer who is married filing jointly.

The 2007 Tax Rates Schedule for married filing jointly is:
Over But not over of the amount over
\$0 \$15,650 10% \$0
\$15,650 \$63,700 \$1,565+15% \$15,650
\$63,700 \$128,500 \$8,772.50+25% \$63,700
\$128,500 \$195,850 \$24,972.50+28% \$128,500
\$195,850 \$349,700 \$43,830.50+33% \$195,850
\$349,700
\$94,601+35% \$349,700

The tax is 10% on the first \$15,650 = \$1,565.00

plus 15% of the amount over \$15,650 up to \$56,650 = \$41,000 x 15% = \$6,150.00

Total = \$7,715.00

The difference is because of the use of the tax tables in the first determination, and these tables are in \$50 increments. John’s taxable income was at the bottom of the increment. If his taxable income had been \$56,675, in the middle of the increment, then the calculated amount would be \$7,718.75.

In addition to the Federal income tax, John will probably be paying state income tax, Social Security tax, and Medicare tax. The Social Security tax in 2007 for John is 6.2% on the first \$97,500 of earned income (wages), or a maximum of \$6,045. There are no exclusions from earned income for Social Security so John will pay the maximum of \$6,045. His wife will pay \$12,000 x 6.2% = \$744. Medicare is 1.45% on all earned income with no maximum. John and his wife will pay \$112,000 x 1.45% = \$1,624 for Medicare in 2007.

Most states also levy income tax, exceptions being Alaska, Florida, Nevada, South Dakota, Texas, Washington, New Hampshire, Tennessee and Wyoming.