Rate Schedule (federal Income Tax) - Use of Rate Schedules

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 2013. 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 $87,850 and $183,250, he uses the fourth bracket in Schedule X.
(3) His federal income tax will be “$17,891.25 plus 28% of the amount over 87,850.” Applying this formula to Taxpayer A, one arrives at the following result:
$17,891.25 + (0.28 * ($175,000 - $87,850)) =
$17,891.25 + (0.28 * $87,150) =
$17,891.25 + $24,402 = $42,293.25.

Accordingly, Taxpayer A must pay $42,293.25 in federal income taxes for 2013.