How federal income tax is calculated
Start with your gross income and subtract pre-tax contributions and other adjustments to get adjusted gross income (AGI). Subtract the larger of the standard deduction or your itemized deductions to get taxable income. That amount runs through the brackets for your filing status: each slice is taxed at its own rate, and the slices are added up. Credits then come off the tax dollar for dollar, and the difference from what was withheld from your paychecks is your refund or balance due.
2026 tax brackets (tax year 2026, filed in 2027)
| Rate | Single | Married filing jointly | Head of household | Married filing separately |
|---|---|---|---|---|
| 10% | $0 | $0 | $0 | $0 |
| 12% | $12,400 | $24,800 | $17,700 | $12,400 |
| 22% | $50,400 | $100,800 | $67,450 | $50,400 |
| 24% | $105,700 | $211,400 | $105,700 | $105,700 |
| 32% | $201,775 | $403,550 | $201,750 | $201,775 |
| 35% | $256,225 | $512,450 | $256,200 | $256,225 |
| 37% | $640,600 | $768,700 | $640,600 | $384,350 |
Standard deduction for 2026: $16,100 single or married filing separately, $32,200 married filing jointly, $24,150 head of household. Additional amount per box checked for age 65+ or blindness: $1,650 married, $2,050 unmarried.
The formula
AGI = gross income − pre-tax contributions Taxable income = AGI − max(standard deduction, itemized) Tax = Σ (income in each bracket × bracket rate) − credits Effective rate = tax / gross income
Worked example
A single filer earns $85,000 and puts $6,000 into a traditional 401(k). AGI = $79,000. Minus the $16,100 standard deduction, taxable income is $62,900.
Tax = 10% × $12,400 + 12% × ($50,400 − $12,400) + 22% × ($62,900 − $50,400) = $1,240 + $4,560 + $2,750 = $8,550. The marginal rate is 22%; the effective rate is 8,550 / 85,000 = 10.06%.
What this estimate leaves out
- Preferential rates on long-term capital gains and qualified dividends; self-employment, Social Security and Medicare taxes; AMT; the 3.8% net investment income tax.
- Income-based phase-outs of credits, and the 37%-bracket limit on itemized deductions.
- Deductions added by the One, Big, Beautiful Bill for seniors, tips, overtime and car-loan interest, and the qualified business income deduction.
- State and local income taxes. Tax is rounded to the cent here; the IRS tax tables use $25 and $50 income bands below $100,000 of taxable income, so the return can differ by a few dollars.
Sources (verified October 30, 2026): Internal Revenue Service, Revenue Procedure 2025-32, §4.01 (tax rate tables) and §4.14 (standard deduction); IRS news release IR-2025-103, October 9, 2025.
Frequently asked questions
What are the 2026 federal income tax brackets?
For tax year 2026 (returns filed in 2027) the rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%. For single filers the 12% bracket starts above $12,400, 22% above $50,400, 24% above $105,700, 32% above $201,775, 35% above $256,225 and 37% above $640,600. Married couples filing jointly have thresholds of $24,800, $100,800, $211,400, $403,550, $512,450 and $768,700. Source: IRS Revenue Procedure 2025-32.
If I move into a higher bracket, is all my income taxed at that rate?
No. Only the dollars above each threshold are taxed at the higher rate. A single filer with $62,900 of taxable income pays 10% on the first $12,400, 12% on the next $38,000 and 22% only on the last $12,500 — $8,550 in total, an average of 13.6% of taxable income.
What is the 2026 standard deduction?
$16,100 for single filers and married filing separately, $32,200 for married filing jointly and $24,150 for heads of household. Each spouse or filer who is 65 or older, or blind, adds $1,650 if married or $2,050 if unmarried.
What is the difference between marginal and effective tax rate?
Your marginal rate is the rate on your next dollar of income — the top bracket you reach. Your effective rate is total tax divided by income, which is always lower because the first dollars are taxed at 10% and 12%.
Why might my real tax bill be different?
This is an estimate of regular federal income tax on ordinary income. It leaves out long-term capital gains and qualified dividends (taxed at 0/15/20%), self-employment tax, the alternative minimum tax, the net investment income tax, phase-outs of credits, the qualified business income deduction, and the new deductions for seniors, tips, overtime and car-loan interest. State and local income taxes are separate.
CalcNest results are estimates based on the inputs and assumptions above, not financial, tax or lending advice. A lender's official Loan Estimate or your account statement is the final word.