Federal Tax Calculator 2018
Don’t let your tax return take you by surprise! Estimate your taxes before you prepare your 2018 Tax Return. Find out if you will owe taxes or how much of a tax refund you will get in 2018. Estimating your taxes before you file your tax return is an essential part of tax planning, so start estimating now with the 2017 Tax Refund and Tax Return Calculator, above.
How to Estimate Taxes with the 2018 Tax Calculator
To begin estimating your taxes with the tax calculator, select your filing status. Then click the blue “Next” button and choose your exemptions for yourself, your spouse, and your dependents. After you enter income information you can enter your tax deductions and tax credits. When you are finished in each section, go on to the next one.
You can track the estimate of your tax refund as you go; the amount of your tax refund (or amount due) is always displayed on the top right of the tax calculator.
The 2017 Tax Calculator will estimate your 2018 Tax Return and any tax refund you will receive in 2017. This calculator will be updated frequently as the IRS releases the latest figures for Tax Year 2017. we offers the use of this tax calculator free of charge.
Federal Income Tax Calculator
Income in America is taxed by the federal government, most states governments, and many local governments. The federal income tax system is progressive, so the rate of tax increases as income increases. Marginal tax rates range from 10% to 39.6%.
How to Calculate Federal Tax Credits
Unlike adjustments, exemptions and deductions, which apply to your income, tax credits apply to your tax liability (which means the amount of tax that you owe).
For example, if you calculate that you have the tax liability of $1,000 (based on your taxable income and your tax bracket) and you are eligible for a tax credit of $200, that would reduce your liability to $800. You would only owe $800.
Tax credits are only awarded in certain circumstances, however. Some credits are refundable, which means you can receive payment for them even if you don’t owe any income tax. The list below describes the most common federal income tax credits.
- The Earned Income Tax Credit is a refundable credit for taxpayers with income below a certain level. The credit can be up to $6,143 per year for taxpayers with three or more children, or lower amounts for taxpayers with two, one or no children.
- The Child and Dependent Care Credit is a nonrefundable credit of up to $3,000 (for one child) or $6,000 (for two or more) related to childcare expenses incurred while working or looking for work.
- The Adoption Credit is a nonrefundable credit equal to certain expenses related to the adoption of a child.
- The American Opportunity Credit is a partially refundable credit of up to $2,500 per year for enrollment fees, tuition and course materials for the first four years of post-secondary education.
There are numerous other credits, including credits for the installation of energy-efficient equipment, a credit for foreign taxes paid and a credit for health insurance payments in some situations.
The Federal Income Tax
The federal personal income tax that is administered by the Internal Revenue Service (IRS) is the largest source of revenue for the U.S. federal government. Nearly all working Americans are required to file a tax return with the IRS each year and most pay taxes throughout the year in the form of payroll taxes that are withheld from their paychecks.
Income taxes in the U.S. are calculated based on tax rates that range from 10% to 39.6%. Taxpayers can lower their tax burden and the amount of taxes they owe by claiming exemptions, deductions and credits. Below, we’ll take a closer look at the most important IRS tax rules to help you understand how your taxes are calculated.
Calculating Income Tax Rate
The United States has a progressive income tax. This means there are higher tax rates for higher income levels. These are called “marginal tax rates” – they do not apply to total income, but only to the income within a specific range.
These ranges are called brackets. Income falling within a specific bracket is taxed at the rate for that bracket. The table below shows the tax brackets for the federal income tax.
You’ll note that the brackets vary depending on whether you are single, married or the head of household. These different categories are called filing statuses. Married persons can choose to file separately or jointly. While it often makes sense to file jointly, filing separately may be the better choice in certain situations.
Based on the rates in the table above, a single filer with an income of $50,000 would have a top marginal tax rate of 25%.
However, that taxpayer would not pay that rate on all $50,000. The rate on the first $9,225 of taxable income would be 10%, on the next $28,225 would be 15% and on the remaining $12,550 would be 25%. This is because marginal tax rates only apply to income that falls within that specific bracket.
Calculating Taxable Income Using Exemptions and Deductions
Federal tax rates apply to taxable income. This is different than your total income (also called gross income). Taxable income is always lower than gross income.
To calculate taxable income, you begin by making certain adjustments from gross income to arrive at adjusted gross income (AGI). Possible adjustments include subtractions for student loan interest payments, contributions to an IRA, moving expenses and health-insurance contributions for self-employed persons.
Once you have calculated adjusted gross income, you can subtract exemptions and deductions (either itemized or standard) to arrive at taxable income. For the 2017 tax year, the exemption is equal to $4,000.
Exemptions can be claimed for each taxpayer as well as dependents such as a spouse and children. For each exemption claimed, you can subtract $4,000 from your taxable income.
Deductions are somewhat more complicated. Many taxpayers claim the standard deduction, which varies depending on filing status, as shown in the table below.