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Basics of US income tax rate schedule

Video transcript

what I want to do in this video is try to get a good understanding of how the US federal income tax rate schedule works and also what people mean when they say tax brackets or what does it mean to be in a tax bracket so let's say that I make a hundred thousand dollars and I'm single and I'm not going to go into the deductions or anything fancy like that so let's say I make one hundred thousand dollars in a given year and these numbers will change as the tax code changes but the general idea is the same thing although the details might change so the way the rate schedule works is that the first 8350 of my hundred thousand dollars will be taxed at 10% so the first eight thousand three hundred fifty dollars will be taxed at 10% so I'll be paying what that's pretty easy to calculate I'll pay eight hundred and thirty five dollars on that first on that first eight thousand three hundred and fifty dollars now the next twenty five thousand six hundred or the next from eight thousand three hundred fifty two thirty three thousand nine hundred and fifty that will be taxed at 15 percent that will be taxed at 15 percent so this amount right over here I will have to pay fifteen percent on that and so that the difference between thirty three thousand nine hundred fifty and eight thousand three hundred fifty is twenty six thousand twenty-five thousand six hundred so it's twenty-five thousand six hundred times fifteen percent I'll calculate it all at the end using a calculator now the next forty eight thousand three hundred dollars is going to be taxed at twenty five percent so let me draw that over here so the next this next slug right over here is going to be taxed at 25 percent so this is the difference between eighty two thousand two hundred fifty and thirty three thousand nine hundred fifty that's forty eight thousand three hundred so it's going to be forty eight thousand three hundred times twenty five percent and then finally the remainder the amount above eighty two fifty since I don't get into the next bracket above that this part right here is going to be taxed at 28% so this part right over here is going to be taxed at 28% let me get my trusty calculator out figure out what that is so if that's going to be taxed debt so the difference between a hundred thousand dollars in eight eighty two thousand two fifty so one hundred one hundred thousand dollars minus eighty to two fifty is seventeen thousand seven hundred and fifty so it is seventeen thousand seven hundred and fifty times twenty eight percent and now I could use the calculator to calculate all of these so it's going to be let's do it all at once seventeen thousand seven hundred and fifty times twenty eight percent so let's say that it's point two eight plus forty eight thousand three hundred forty eight thousand three hundred times twenty-five percent 0.25 plus twenty five thousand six hundred twenty-five thousand six hundred times fifteen percent point one five finally plus eight hundred and thirty-five dollars plus eight hundred and thirty-five dollars I'm going to pay twenty one thousand seven hundred and twenty dollars so this the sum of all of these in total I'm going to pay twenty one thousand already forgot the number twenty one thousand seven hundred seven hundred and twenty dollars and I want to make sure you don't have the misconception notice you only pay the twenty eight percent on the incremental amount when you enter that bracket you don't pay this twenty-eight percent on the entire hundred thousand dollars just on the increment above eighty two fifty you don't pay the twenty-five percent on the entire amount just on the increment between 33 and eighty-two