๐ How to Calculate Income Tax in 2026
Complete Guide to Federal Tax Brackets, Deductions, Credits & Examples
๐ Table of Contents
๐ฏ Key Takeaway
Taxable Income = Gross Income โ Deductions. Then apply the progressive tax brackets: the US uses 7 rates from 10% to 37%. You only pay each rate on income within that bracket, not your entire income.
1. Income Tax Overview
The US federal income tax system is progressive, meaning higher income is taxed at higher rates. Understanding how this works is essential for tax planning and financial decisions.
๐ก Marginal vs Effective Tax Rate
- Marginal Rate: The rate on your last dollar of income (your tax bracket)
- Effective Rate: Your total tax รท total income (your actual average rate)
Types of income subject to federal tax:
- Wages, salaries, and tips
- Self-employment income
- Investment income (interest, dividends, capital gains)
- Rental income
- Retirement distributions
- Unemployment compensation
2. 2026 Federal Tax Brackets
2.1 Single Filers
| Tax Rate | Taxable Income Range | Tax Owed |
|---|---|---|
| 10% | $0 โ $11,925 | 10% of income |
| 12% | $11,926 โ $48,475 | $1,192.50 + 12% over $11,925 |
| 22% | $48,476 โ $103,350 | $5,578.50 + 22% over $48,475 |
| 24% | $103,351 โ $197,300 | $17,651.00 + 24% over $103,350 |
| 32% | $197,301 โ $250,525 | $40,199.00 + 32% over $197,300 |
| 35% | $250,526 โ $626,350 | $57,231.00 + 35% over $250,525 |
| 37% | Over $626,350 | $188,769.75 + 37% over $626,350 |
2.2 Married Filing Jointly
| Tax Rate | Taxable Income Range | Tax Owed |
|---|---|---|
| 10% | $0 โ $23,850 | 10% of income |
| 12% | $23,851 โ $96,950 | $2,385 + 12% over $23,850 |
| 22% | $96,951 โ $206,700 | $11,157 + 22% over $96,950 |
| 24% | $206,701 โ $394,600 | $35,302 + 24% over $206,700 |
| 32% | $394,601 โ $501,050 | $80,398 + 32% over $394,600 |
| 35% | $501,051 โ $751,600 | $114,462 + 35% over $501,050 |
| 37% | Over $751,600 | $202,154.50 + 37% over $751,600 |
2.3 Head of Household
| Tax Rate | Taxable Income Range |
|---|---|
| 10% | $0 โ $17,000 |
| 12% | $17,001 โ $64,850 |
| 22% | $64,851 โ $103,350 |
| 24% | $103,351 โ $197,300 |
| 32% | $197,301 โ $250,500 |
| 35% | $250,501 โ $626,350 |
| 37% | Over $626,350 |
3. Standard & Itemized Deductions
3.1 Standard Deduction for 2026
| Filing Status | Standard Deduction | Additional (65+ or Blind) |
|---|---|---|
| Single | $15,000 | +$2,000 each |
| Married Filing Jointly | $30,000 | +$1,600 each |
| Married Filing Separately | $15,000 | +$1,600 each |
| Head of Household | $22,500 | +$2,000 each |
3.2 Common Itemized Deductions
You can choose to itemize if your deductions exceed the standard amount:
- State and Local Taxes (SALT): Up to $10,000 cap
- Mortgage Interest: On loans up to $750,000
- Charitable Contributions: Up to 60% of AGI
- Medical Expenses: Exceeding 7.5% of AGI
- Casualty Losses: From federally declared disasters
โ ๏ธ Standard vs Itemized
About 90% of taxpayers use the standard deduction. Only itemize if your total itemized deductions exceed the standard deduction for your filing status.
4. Income Tax Formulas
4.1 Calculate Adjusted Gross Income (AGI)
๐ Formula: Adjusted Gross Income
AGI = Gross Income โ Above-the-Line Deductions
Above-the-line includes: 401(k) contributions, IRA, student loan interest, HSA
4.2 Calculate Taxable Income
๐ Formula: Taxable Income
Taxable Income = AGI โ (Standard Deduction or Itemized Deductions)
Choose whichever deduction method is larger
4.3 Calculate Tax Using Brackets
๐ Formula: Progressive Tax Calculation
Total Tax = ฮฃ (Income in Bracket ร Bracket Rate)
Sum the tax from each bracket up to your taxable income
4.4 Calculate Tax Owed or Refund
๐ Formula: Final Tax Due
Tax Due = Total Tax โ Tax Credits โ Withholdings โ Estimated Payments
Negative result = refund; positive result = amount owed
5. Income Tax Calculator 2026
Estimate your federal income tax based on your income and filing status:
๐งฎ Federal Income Tax Calculator 2026
Gross Income
$0
AGI
$0
Taxable Income
$0
Federal Tax
$0
Effective Rate
0%
Marginal Rate
0%
6. Step-by-Step Calculation Process
- Calculate Gross Income: Add all income sources (wages, investments, rental, etc.)
- Subtract Above-the-Line Deductions: 401(k), IRA, HSA, student loan interest = AGI
- Subtract Standard or Itemized Deduction: Use whichever is larger = Taxable Income
- Apply Tax Brackets: Calculate tax for each bracket progressively
- Subtract Tax Credits: Child Tax Credit, Earned Income Credit, etc.
- Subtract Withholdings: Taxes already paid = Tax Due or Refund
7. Worked Examples
Example 1: Single Filer with $75,000 Salary
๐ Problem
You earn $75,000 salary, contribute $6,000 to 401(k), and take the standard deduction. Filing single. What's your federal tax?
Step 1: Calculate AGI
AGI = $75,000 โ $6,000 = $69,000
AGI = $75,000 โ $6,000 = $69,000
Step 2: Subtract Standard Deduction
Taxable = $69,000 โ $15,000 = $54,000
Taxable = $69,000 โ $15,000 = $54,000
Step 3: Calculate Tax by Bracket
10% on first $11,925 = $1,192.50
12% on $11,926โ$48,475 = $4,386.00
22% on $48,476โ$54,000 = $1,215.50
Total: $6,794
10% on first $11,925 = $1,192.50
12% on $11,926โ$48,475 = $4,386.00
22% on $48,476โ$54,000 = $1,215.50
Total: $6,794
Step 4: Calculate Effective Rate
$6,794 รท $75,000 = 9.1% effective rate
$6,794 รท $75,000 = 9.1% effective rate
Answer: Federal tax is $6,794. Marginal rate is 22%, effective rate is 9.1%.
Example 2: Married Couple with $150,000 Combined
๐ Problem
Married couple earns $150,000 combined, contributes $12,000 to 401(k)s, $7,000 to IRAs, standard deduction. Filing jointly.
Step 1: Calculate AGI
AGI = $150,000 โ $12,000 โ $7,000 = $131,000
AGI = $150,000 โ $12,000 โ $7,000 = $131,000
Step 2: Subtract Standard Deduction
Taxable = $131,000 โ $30,000 = $101,000
Taxable = $131,000 โ $30,000 = $101,000
Step 3: Calculate Tax by Bracket
10% on first $23,850 = $2,385.00
12% on $23,851โ$96,950 = $8,772.00
22% on $96,951โ$101,000 = $891.00
Total: $12,048
10% on first $23,850 = $2,385.00
12% on $23,851โ$96,950 = $8,772.00
22% on $96,951โ$101,000 = $891.00
Total: $12,048
Answer: Combined federal tax is $12,048. Marginal rate 22%, effective rate 8.0%.
8. Tax Credits That Reduce Your Bill
Unlike deductions (which reduce taxable income), credits directly reduce your tax bill:
๐ฐ Major Tax Credits for 2026
- Child Tax Credit: Up to $2,000 per qualifying child
- Earned Income Credit: Up to $7,830 for families (varies by income/children)
- Child & Dependent Care Credit: 20-35% of up to $3,000/$6,000 expenses
- American Opportunity Credit: Up to $2,500 for higher education
- Lifetime Learning Credit: Up to $2,000 for education
- Saver's Credit: Up to $1,000 for retirement contributions
- EV Tax Credit: Up to $7,500 for qualifying electric vehicles
โ ๏ธ Refundable vs Non-Refundable Credits
- Refundable: Can reduce tax below zero (you get a refund). Examples: EITC, Child Tax Credit (partially)
- Non-Refundable: Can only reduce tax to zero. Examples: Child Care Credit, Education Credits
๐ Related Calculators
โ Frequently Asked Questions
Q: How do I calculate my income tax?
Calculate your gross income, subtract above-the-line deductions to get AGI, then
subtract the standard or itemized deduction to get taxable income. Apply the progressive tax
brackets to your taxable income, then subtract any tax credits. The result is your tax
liability.
Q: What is the standard deduction for 2026?
For 2026, the standard deduction is $15,000 for single filers, $30,000 for married
filing jointly, $22,500 for head of household, and $15,000 for married filing separately. Additional
amounts apply for those 65+ or blind.
Q: What are the 2026 federal tax brackets?
The 2026 federal tax brackets are: 10% ($0โ$11,925 single), 12% ($11,926โ$48,475),
22% ($48,476โ$103,350), 24% ($103,351โ$197,300), 32% ($197,301โ$250,525), 35% ($250,526โ$626,350),
and 37% (over $626,350). Different thresholds apply for other filing statuses.
Q: What's the difference between marginal and effective tax rate?
Your marginal rate is the tax bracket for your highest dollar of income (e.g.,
22%). Your effective rate is your total tax divided by total incomeโit's always lower because you
pay lower rates on income in lower brackets. Effective rate represents what you actually pay on
average.
Q: Should I take standard or itemized deductions?
Take whichever is larger. Add up your itemized deductions (SALT up to $10,000,
mortgage interest, charitable contributions, medical expenses over 7.5% of AGI). If the total
exceeds your standard deduction, itemize. About 90% of taxpayers benefit more from the standard
deduction.
