Federal Income Tax Calculator

The US uses a progressive, marginal system -- only the income within each bracket is taxed at that bracket's rate, not your entire income at your top rate. This is why your effective (average) tax rate is always lower than your marginal (top) bracket rate, a distinction this calculator shows explicitly.Read more: Federal Income Tax Calculator: Find Your Real Tax Bracket

A deduction reduces your taxable income before tax is calculated, so its value depends on your bracket. A credit reduces your tax bill directly, dollar for dollar, regardless of bracket -- which generally makes credits more valuable than a deduction of the same nominal size.Read more: How Tax Brackets Actually Work (You’re Not Taxed Like You Think)

Assets held over one year qualify for long-term capital gains rates, which are generally lower than ordinary income tax rates; assets held one year or less are taxed as short-term gains at your regular income tax rate. Holding period alone can meaningfully change the tax owed on the same gain.Read more: Paycheck Calculator: What Actually Lands in Your Account

Traditional accounts (401(k), IRA) give you a tax deduction now and are taxed on withdrawal in retirement; Roth accounts are funded with after-tax money now and grow completely tax-free. Broadly, if you expect to be in a lower tax bracket in retirement than today, traditional tends to win, and vice versa for Roth -- this calculator lets you compare both with your own numbers.Read more: Capital Gains Tax Calculator: What You’ll Really Owe the IRS