A rate schedule is a chart that helps United States taxpayers determine their federal income
tax burden for a particular year.
Another name for “rate schedule” is “rate table.”
Origin The origin of the current rate schedules is
the Internal Revenue Code of 1986, which is separately published as Title 26 of the United
States Code.
With that law, the U.S. Congress created four types of rate tables, all of which are based
on a taxpayer’s filing status.
Each year the United States Internal Revenue Service updates rate schedules in accordance
with guidelines that Congress established in the IRC.
In general, the IRS bases such adjustments on inflation and cost of living increases
in the previous year.
Application The tax rate schedules give tax rates for
given levels of taxable income.
There is a complex relationship between taxable income and actual income, making it difficult
to draw conclusions from the tables.
Even the marginal tax rates are misleading because there are various laws that relate
taxable income to actual income such that in increase of a dollar of actual income results
in an increase of more than a dollar in taxable income, thus making the marginal tax rate
greater than what is suggested by the table.
These schedules apply only to regular US income tax, whereas there is a second income tax,
the Alternative Minimum Tax, that uses a different schedule.
A taxpayer's tax obligation is the higher of those two income taxes, which makes drawing
conclusions from the table even more difficult.
Format All rate schedules have an identical format,
containing four columns and seven rows.
The first two columns indicate the range of taxable income that a taxpayer must have to
qualify for a particular tax rate.
The third column indicates the tax rate itself.
The fourth column gives the range of income to which the current marginal rate applies.
Given that Congress has prescribed a system of progressive taxation, all but the lowest-earning
taxpayers pay distinct rates for different parts of their income.
The following are the IRS rate schedules for 2014:
Schedule X — Single Schedule Y-1 — Married filing Jointly or
Qualifying Widow(er) Schedule Y-2 — Married Filing Separately
Schedule Z — Head of Household Caution: These tables shown above are accurate
for 2014 only and do not apply for any other year.
For 2013 Use of rate schedules
To use a rate schedule, a taxpayer must know their filing status and amount of taxable
income.
Definitions related to one’s filing status can be found in IRC § A.2(a-b), and general
guidelines regarding taxable income are described in IRC § A.63(a-b).
Once a taxpayer has made these determinations, he references the pertinent rate schedule,
finds the appropriate bracket, and uses the formula described in the third column to determine
his federal income tax.
Assume, for example, that Taxpayer A is single and has a taxable income of $175,000 in 2014.
The following steps apply the procedure outlined above:
(1) Because he is single, the pertinent rate table is Schedule X.
(2) Given that his income falls between $89,350 and $186,350, he uses the fourth bracket in
Schedule X.
(3) His federal income tax will be “$18,193.75 plus 28% of the amount over $89,350.”
Applying this formula to Taxpayer A, one arrives at the following result:
$18,193.75 +) = $18,193.75 + =
$18,193.75 + $23,982 = $42,175.75.
Accordingly, Taxpayer A must pay $42,175.75 in federal income taxes for 2014.
Since his income is in the fourth bracket, his marginal tax rate for each additional
dollar he earns is 28%, but his effective tax rate is 24%.
See also Income tax in the United States
Progressivity in United States income tax General:
Tax bracket References