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Federal Income Tax

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April 13, 2023

What are Federal Income Taxes?

Federal income taxes are taxes imposed by the United States government on the income of individuals, businesses and other entities. In general, federal income taxes apply to the income earned during a calendar year. The exact tax rates vary depending on the amount of income earned, dependents, deductions and other important factors.

Key Takeaways

  • Federal income taxes refer to the taxes that the US federal government imposes on the earnings of various entities, including individuals and businesses.
  • The tax rates for federal income taxes are progressive, therefore those with higher incomes pay a higher percentage of their income in taxes.
  • Failure to pay federal income taxes can result in harsh legal penalties.

Federal Income Tax Brackets

Federal income taxes in the United States operate using a progressive model. This means that ranges of income levels are taxed at different rates. As an individual’s income increases, so does their federal income tax liability.

The Internal Revenue Service (IRS) typically announces changes to tax brackets and rates every year. According to the IRS, for tax year 2023, the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly).

The other rates are as follows:

 35% for incomes over $231,250 ($462,500 for married couples filing jointly);

  • 32% for incomes over $182,100 ($364,200 for married couples filing jointly);
  • 24% for incomes over $95,375 ($190,750 for married couples filing jointly);
  • 22% for incomes over $44,725 ($89,450 for married couples filing jointly);
  • 12% for incomes over $11,000 ($22,000 for married couples filing jointly).

It is essential to note that the tax brackets above should be applied only to taxable income. The taxable income is the money leftover after subtracting certain expenses such as deductions and credit. 

Federal Income Tax Deductions and Credit

In order to encourage beneficial behaviors such as donating to charity, the United States government offers taxpayers to take deductions and credits on their federal income tax returns.

Deductions are defined as amounts that you can subtract from your taxable income. For instance, if you made $50,000 in one year and donated $10,000 to charity, you may only be required to pay taxes on $40,000. Simply put, deductions can significantly reduce your tax liability.

Tax credits, on the other hand, are a dollar-for dollar reduction in the amount of taxes you owe. A common example of federal income tax credit is the Earned Income Tax Credit that reduced the tax responsibility of low-income individuals and families.

Bottom Line

In summary, federal income taxes play a critical role in United States tax law. Nevertheless, understanding how these taxes work and navigating the US tax code can be challenging. If you have any questions or concerns about this year’s federal income taxes, you may want to consider seeking professional legal support. Our platform provides access to experienced tax lawyers who can help you understand your tax liability, maximize deductions and ensure you are complying with US tax laws and regulations. 

Connect with a tax lawyer in your area today at Attorney At Law.

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