If you're seeing this message, it means we're having trouble loading external resources on our website.

If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked.

### Course: Finance and capital markets>Unit 4

Lesson 1: Personal taxes

# Basics of US income tax rate schedule

Understanding that a marginal tax rate does not apply to all of income. Created by Sal Khan.

## Want to join the conversation?

• Why couldn't you add up all the percents and then multiply by \$100,000?
• Good question. It's because each bracket is taxed differently. For example, let's say you make \$33,500 dollars/year. 10% of \$8,350 is \$835. 15% of the next 25,600 is \$3,840. If you add \$835 and \$3,840, you get \$4,675. If you calculate it by taxing the total dollars/year by 25%, you get \$8,375. Also, how do you calculate it the way you suggested if you make somewhere between one of the brackets? Hope this helps.
• What if you earn a lot of money and the bracket goes very high up, then can the percentage become 100?
(1 vote)
• the highest current Federal tax bracket is 39.6% for anybody making over 400,000 a year or married making over 450,000
• I am horrendously confused about something here but not sure how to word it:

The first tax bracket has him paying 10% on 8350, then the second has him paying 15% on 33950, yet he subtracts the initial 8350 he paid the 10% for, so he'd only end up paying 15% on 25600. Why does he do this and not just pay 15% on 33950? If that makes any sense.
• Because you should only be taxed once on the money. The first bracket taxes you 10% for the 8350\$. When you now try to calculate for the second bracket, you deduct the amount that has already been taxed in the first bracket because again it has already been taxed. Hope I made it clear.
• Whats the difference between flat tax and progressive tax?
• A progressive tax is a tax like the one Sal described in the video. A flat tax is a tax with a constant rate. Perhaps 20% of a person's income will be taxed, regardless of which tax bracket they sit in.
• How do we find the effective tax rate? I see how the brackets work, but where would you get that tax percentage rate?
• Lets look at this example. the total was around 21.7K so thats around 22%. Even when the math was being done, i was expecting it to be between 25% and 28% so the amount was a little surprising. It might just be that jump between 15% and 25% was scaling it slower. If the difference in rates are lower in brackets, you can see that the value will converge to the tax% of the bracket.
• The more money you earn in a year, you get taxed more? So, what if every year you only earned \$10,000 for 3 years but one year you earned \$900,000. That would mean you'd get taxed on the \$900,000, but because you only earned 30,000 in those 3 years, and that was the money you had, you would not have the money to pay for the tax. Would the government take that into consideration too? I know it's not likely, but still?
• The tax comes straight out of your income. So, if you have to pay a tax of \$278430, you would find that your employer will pay \$900000, but you would get \$621,570. So how would you not be able to pay for it? You still have a surplus of \$621,570. The tax will always be less than the amount that you are getting for your money.
• I'm just 13 and so do you have to pay the amount you get for income tax rate?
• I'm not understanding your question in regards to the video. There are many more factors that would need to be looked at to actually calculate what your tax liability ends up being. In this example - he doesn't talk any further than calculating based on just the money you earn and not taking any deductions. I hope that explains a bit further.