What is the difference between marginal and effective tax rate?
Your marginal tax rate is the percentage of tax applied to your next dollar of income — it is the rate of the bracket your income falls into. Your effective tax rate is the average rate across all brackets, calculated as total tax divided by taxable income. The effective rate is always lower than the marginal rate in a progressive tax system.
What income counts for federal income tax?
Federal income tax applies to most forms of earned and unearned income, including wages, salaries, tips, freelance income, interest, dividends, rental income, and capital gains. Some income — like municipal bond interest — may be exempt. This calculator treats the input as taxable income already, after deductions.
What is the standard deduction for 2025?
For the 2025 tax year, the standard deduction is approximately $15,000 for single filers, $30,000 for married filing jointly, and $22,500 for head of household. These amounts are adjusted annually for inflation. If your itemized deductions exceed the standard deduction, you would use itemized instead.
Are capital gains taxed at the same rate as ordinary income?
No. Long-term capital gains (assets held over one year) are taxed at preferential rates of 0%, 15%, or 20% depending on your income level. Short-term capital gains (assets held one year or less) are taxed as ordinary income. This calculator only covers ordinary income brackets.
Do federal tax brackets change every year?
Yes. The IRS adjusts tax bracket thresholds annually to account for inflation. The brackets used in this calculator are for the 2025 tax year. Always verify current-year brackets before filing.
Does this calculator include state taxes?
No. This calculator only estimates federal income tax using the 2025 federal brackets. State and local taxes vary widely — some states have no income tax (e.g., Texas, Florida), while others have rates up to 13%+ (e.g., California). You would need a separate calculation for state taxes.