Finance

2017 Tax Brackets – How To Figure Out Your Tax Rate and Bracket This Year

As you know, our tax bracket system is a “progressive” mechanism with tax rates that increase as taxable income increases. In contrast, a “regressive” system decreases the relative tax burden as income increases.

Each year, tax brackets shift due to inflation and sometimes due to tax legislation changes.

What Is Your Marginal Tax Rate?

Your marginal tax rate is the key to figuring out what tax bracket you’re in. The cornerstone of your marginal tax rate is that not all of your income is taxed at the same rate. As your income rises, you may be subject to a higher tax rate. Your marginal rate is the rate that is applied to your highest layer of income.

You may pay more in taxes because the more income you earn, the higher the tax rate that applies to your highest income.

2017 Tax Brackets

Income limits for 2017 tax brackets and all filing statuses are adjusted for inflation.

The top tax rate remains 39.6%. The other marginal rates are: 10%, 15%, 25%, 28%, 33% and 35%. Different rates apply to various capital transactions, such as sales of stock held long-term.

*Please note: The following information should be used as you prepare your 2017 tax return in 2018. It includes 2017 tax brackets by filing status, including: Individual (or single) filers, Married Filing Jointly, Heads of Household, and Married Filing Separately.

2017 tax brackets individual filers

head of household tax brackets 2017

Source: Forbes

Can You Manipulate Your Marginal Tax Rate and Get In a Different Tax Bracket?

Simply put, maybe. Your marginal tax rate is associated with your taxable income (not salary or gross income).

Paying more in taxes because you earn more is not necessarily a bad thing, but paying more taxes than you have to is! You can may be able to reduce your marginal tax rate many ways. Here are a few potential tax deductions and exclusions that may reduce your marginal rate:

  • Contributing to a deductible IRA or increasing your 401(k) contribution
  • Offsetting capital gains with capital losses
  • Student Loan Interest
  • Work-Related Educational Expenses
  • Contributing to your Health Savings Account (HSA)
  • Itemizing deductions if they’re more than your standard deduction
  • Moving expenses if you moved for your job and are not reimbursed by your employer
  • Alimony Paid

Even if you cannot change your tax bracket, deductions reduce your taxable income and consequently reduce your tax.

How Do You Find Your Marginal Tax Rate From Prior-Year Returns?

Now that you know what a marginal tax rate is, you probably want to know where to find it on prior-year tax returns? Unfortunately, your marginal rate is not shown directly on your tax return, but you need your tax return to determine your rate.

Most individuals can use this simple method to determine their marginal rate. First, make sure you know what your filing status is, as shown next to lines 1-5 on Forms 1040 or 1040A. If you file Form 1040EZ, your filing status is either “Married Filing Jointly” or “Single.” Then, find your taxable income on your tax return (Form 1040 line 43, Form 1040A line 27, or Form 1040EZ line 6). Visit the IRS website and look for the Tax Rate Schedules in the Tax Guide Pub. 17 or Form 1040 instructions. For example, if you are married and file a joint return and your taxable income was $100,000 in 2016, your marginal rate is 25%.

You can use this process as well to determine your 2017 tax bracket in 2018 as well.

Does this post leave you confused still? You are not at this alone. Get matched with a tax preparer at Block Advisors now.

More Finance Insights

View More
Insights Icon

Get Matched Today

Find Your Advisor