Question 1

What is taxable income and how is it calculated?

Accepted Answer

Taxable income is the portion of your income subject to federal income tax. It equals your Adjusted Gross Income (AGI) minus your standard or itemized deduction. AGI itself is your gross income minus above-the-line deductions like 401(k) contributions, IRA deductions, and HSA contributions.

Question 2

What is the difference between my marginal tax rate and my effective tax rate?

Accepted Answer

Your marginal tax rate is the rate that applies to your next dollar of income — the rate of your highest bracket. Your effective tax rate is the average rate you pay across all your income. Because the US uses a progressive bracket system, your effective rate is almost always lower than your marginal rate. For example, a single filer with $75,000 of taxable income is in the 22% bracket, but their effective rate might be around 13–14% because lower income was taxed at 10% and 12% first.

Question 3

How are tax brackets calculated? Am I taxed at one rate on all my income?

Accepted Answer

No — this is one of the most common tax misconceptions. Tax brackets are progressive, which means each bracket only applies to the income that falls within it. If you earn $75,000 as a single filer, the first $11,925 is taxed at 10%, the next $36,550 at 12%, and only the income above $48,475 is taxed at 22%. You are never taxed at your top bracket rate on your entire income.

Question 4

Is overtime taxed more heavily than regular pay?

Accepted Answer

No — overtime pay is taxed at the same rates as regular wages. The confusion arises because higher income can push some of your earnings into a higher bracket. But that only applies to the amount above the bracket threshold, not your entire income. If overtime pushes $5,000 of earnings into the 22% bracket, only those $5,000 are taxed at 22%.

Question 5

Are bonuses taxed differently?

Accepted Answer

Employers often withhold federal income tax on bonuses at a flat 22% supplemental rate, which can result in more tax being withheld than you actually owe. In terms of your actual tax liability, bonuses are taxed as ordinary income at your marginal rate — the same as regular wages. When you file your return, you get credit for whatever was withheld and owe any difference.

Question 6

How does the standard deduction work?

Accepted Answer

The standard deduction is a flat dollar amount the IRS allows you to subtract from your AGI before calculating tax. For 2027, it is $15,375 for single filers and $30,750 for married filing jointly (2026: $15,000 / $30,000). You do not need to itemize expenses to claim it. If your actual deductible expenses (mortgage interest, state taxes, charitable contributions) are less than the standard deduction, taking the standard is almost always the right choice.

Question 7

What is Adjusted Gross Income (AGI) and why does it matter?

Accepted Answer

AGI is your gross income minus above-the-line deductions — things like traditional 401(k) contributions, IRA deductions, HSA contributions, and the deductible half of self-employment tax. AGI matters because it is the starting point for calculating your standard deduction, it determines eligibility for many credits (like the Child Tax Credit), and it affects phaseouts for IRA deductibility and other benefits.

Question 8

How do tax credits reduce taxes differently from deductions?

Accepted Answer

A tax credit reduces your tax bill dollar-for-dollar. A $2,000 credit saves you $2,000 in taxes. A tax deduction reduces your taxable income, so the tax savings depend on your marginal rate. A $2,000 deduction saves you $440 if you are in the 22% bracket. Credits are generally more valuable, which is why the Child Tax Credit is so impactful.

Question 9

How does a 401(k) contribution affect my taxes?

Accepted Answer

Traditional 401(k) contributions are deducted from your taxable wages before income tax is calculated. Contributing $10,000 reduces your taxable income by $10,000, saving you $10,000 × your marginal rate in federal income tax. Note that 401(k) contributions do NOT reduce FICA (Social Security and Medicare) taxes — payroll taxes still apply to the full wage amount.

Question 10

How does filing status affect my taxes?

Accepted Answer

Filing status determines your standard deduction amount and the income thresholds for each tax bracket. Married Filing Jointly has the most favorable brackets — roughly double the single thresholds — and the highest standard deduction. Head of Household falls between single and MFJ. Married Filing Separately usually results in the least favorable treatment and restricts several deductions and credits.

Question 11

Why is my effective tax rate lower than my tax bracket?

Accepted Answer

Because not all of your income is taxed at your top bracket rate. The progressive bracket system taxes lower income at lower rates. If you are in the 22% bracket, it means only the income above $49,675 (for a single filer in 2027, or $48,475 in 2026) is taxed at 22%. Everything below that threshold is taxed at 10% or 12%. Your effective rate is the weighted average of all the rates applied to your income.

Question 12

How does a raise affect my taxes?

Accepted Answer

A raise increases your federal income tax only on the additional income, at your marginal rate. If you are in the 22% bracket and earn $10,000 more, you will pay approximately $2,200 more in federal income tax — not 22% of your total salary. Your take-home pay increases by about $7,800 from a $10,000 raise at that bracket. Use our What If? mode to see the exact impact for your situation.

Question 13

What are payroll taxes and how are they different from income tax?

Accepted Answer

Payroll taxes (FICA) include Social Security (6.2% of wages up to $180,600 in 2027 / $176,100 in 2026) and Medicare (1.45% of all wages, with an extra 0.9% above $200,000 for single filers). Unlike income tax, payroll taxes are not affected by deductions, filing status, or credits. They apply to gross wages from the first dollar earned. Self-employed individuals pay the full 15.3% combined rate.

Question 14

How much of a bonus do I actually keep?

Accepted Answer

The federal income tax on a bonus depends on your marginal rate. If you are in the 22% bracket, expect to lose about 22% of a bonus to federal income tax, plus 7.65% to FICA payroll taxes (if you have not hit the Social Security wage cap). So a $10,000 bonus might result in approximately $7,000 in take-home pay for a 22% bracket taxpayer. Use the What If? mode and add your bonus amount to see the precise impact.

Question 15

What gross salary do I need to take home a target amount?

Accepted Answer

Use our Target Take-Home mode. Enter the annual take-home pay you need, and the calculator works backward through the full tax model — brackets, payroll taxes, deductions, and credits — to find the exact gross salary required. This is especially useful when negotiating compensation or evaluating a job offer.

Question 16

Does this calculator include state income taxes?

Accepted Answer

Not in the current version. This calculator covers US federal income tax and FICA payroll taxes. State income tax is highly variable by state (some states have no income tax, others have flat or progressive rates) and is planned for a future update. For a full picture of your tax burden, check your state tax authority for rates specific to your state.

Free Federal Income Tax Calculator 2026 & 2027

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