Income Tax Calculator

Before you file your taxes this year, use our 1040 tax calculator to estimate your taxes owed and potential refund. This calculator allows you to input nearly all the details you’d typically include on your actual tax return, providing a thorough preliminary estimate.

Overview of Federal Taxes

Federal income taxes apply a percentage rate based on the income earned by each individual and corporation. Since this calculator focuses solely on individual taxes, corporate taxes are not covered here.

Individual tax rates in the United States vary based on a person’s income level. Higher earners pay a greater percentage of their income in taxes, which is referred to as a progressive tax system. This differs from a flat tax, where everyone would pay the same percentage, or a regressive tax, where higher earners would pay a lower percentage.

Currently, the U.S. federal tax system includes seven tax brackets, with rates ranging from 10% to 37%.

The income ranges for each bracket vary depending on filing status: whether you file as a single individual, married filing jointly, married filing separately, or head of household.

For example, in 2022, a single filer with taxable income between $41,775 and $89,075 would fall into the 22% tax bracket. However, for a married couple filing jointly, the 22% bracket would apply to combined incomes between $83,550 and $178,150.

The chart below outlines all seven tax brackets and the corresponding income ranges based on filing status.

The Federal Income Tax

Calculating your federal income taxes is more complex than the basic tax bracket percentages might suggest. Our 1040 tax calculator incorporates all these complexities into its methodology to give you a more accurate estimate.

To compute your federal income tax accurately, you need to understand three key elements:

1. The difference between marginal and absolute tax rates
2. The role of FICA taxes
3. How you earned your income and when it gets taxed

Let’s dive into the details of how this process works.

Calculating Income Tax Rate

To calculate your income tax rate, you must incorporate all three items listed above.

Marginal tax rates

The tax brackets represent marginal tax rates, not absolute rates. What does that mean? It means that a single person making $80,000 does not pay 22% of the entire $80,000 in taxes. Instead, they pay 10% on the first $10,275, 12% on income between $10,276 and $41,775, and then 22% on the income from $41,776 to $80,000.

The total tax paid is referred to as the effective tax, which represents the actual percentage of total income paid in taxes. The effective tax rate will always be lower than the marginal tax rate.

FICA taxes

FICA stands for the Federal Insurance Contribution Act, which funds Social Security and Medicare. FICA functions more like a flat tax since nearly everyone pays the same rate. Currently, the combined FICA tax rate is 15.3%, covering both Social Security and Medicare contributions.

W-2, 1099, and Self-employment

There are many ways to earn income, but W-2, 1099, and self-employment are among the most common.

A W-2 employee works for an employer and receives a regular paycheck, with federal income taxes and FICA taxes automatically withheld. When W-2 employees file their tax return in April, they reconcile whether too much or too little tax was withheld throughout the year. If too much was withheld, they receive a refund; if too little, they owe additional tax. Importantly, W-2 employees pay only half of the FICA tax themselves, while their employer covers the other half.

A 1099 employee, often referred to as an independent contractor, works for another company but is not on the company’s formal payroll. When a 1099 contractor is paid, no taxes are withheld, meaning the contractor is responsible for paying both the full income tax owed and the full 15.3% FICA tax. Because taxes are not withheld automatically, 1099 contractors are encouraged to set aside a portion of their income for taxes and may need to make estimated quarterly tax payments. They are called “1099 employees” because the companies they work with must issue a 1099 form to report income if the contractor earned over $600 during the year.

Self-employment income is similar to 1099 income but may also involve owning your own business. If you operate your own business, your customers pay you directly, and you are responsible for paying income taxes and the full 15.3% FICA tax yourself. This responsibility for the full tax burden is commonly referred to as paying self-employment tax.

Calculating Taxable Income Using Exemptions and Deductions

Further complicating the tax calculation process, no one pays taxes on the full amount of their income. You must apply deductions to your total income, and the tax rate you actually pay applies only to your Adjusted Gross Income (AGI).

Everyone can claim what is known as the standard deduction, which lowers your taxable income by a fixed amount. Here’s the table showing the standard deduction amounts for each filing status:

For example, a married couple filing jointly with a total income of $200,000 will not be taxed on the full $200,000. At a minimum, they will subtract $25,900—the standard deduction—reducing their taxable income to $174,100.

If you scroll back up to the tax brackets table, you’ll notice that with $200,000 in taxable income, this couple would have fallen into the 24% tax bracket. However, after applying the standard deduction, their taxable income drops into the 22% bracket.

This basic concept highlights why tax calculations can become complicated. In addition to the standard deduction, taxpayers may claim a wide variety of other deductions and credits, each of which further reduces taxable income. For many filers, the goal is to find enough deductions and credits to move into a lower tax bracket and ultimately lower the amount owed.

Our 1040 tax calculator allows you to input a range of deductions and credits so you can estimate how much you might be able to reduce your taxes.

How to Calculate Federal Tax Credits

 As stated, there are many other deductions and credits you can claim to reduce your tax burden. However, if your deductions and credits add up to less than the standard deduction, you would simply use the standard deduction amount. If your total credits and deductions exceed the standard deduction, you would use your itemized total instead.

Other common tax credits and deductions people claim include:

• Student loan interest
• State and local taxes paid, including sales tax
• Mortgage interest paid
• Charitable donations
• Medical expenses exceeding 7.5% of your AGI
• Child tax credit
• Renewable energy tax credits
• Earned income tax credit for people making below certain amounts
• Business expenses, especially common for self-employment taxes
• Pre-tax retirement account contributions
• HSA contributions

There are many other types of credits and deductions available. Some, like pre-tax retirement contributions, automatically reduce your taxable income. Others, such as charitable donations and mortgage interest, must be totaled and compared against the standard deduction to determine which provides a greater benefit.

Our 1040 tax calculator allows you to input all this information if you have it available. The more details you provide, the more accurately the calculator can predict your potential refund or taxes owed.

Calculating Your Tax Refund

So how do you calculate your tax refund?

You simply compare the amount of taxes you paid throughout the year to the amount of taxes you actually owe after adjusting your income and applying all available credits and deductions.

If you paid more taxes than you owed for the year, you will receive a refund. If you paid less than you owed, you will need to pay the difference.

Self-employed individuals and 1099 workers need to be especially careful. Unlike W-2 employees, they typically do not have taxes automatically withheld from their earnings. Instead, they are responsible for setting aside money and making estimated quarterly tax payments. Without paying quarterly taxes, self-employed and 1099 individuals will likely owe taxes at year-end rather than receiving a refund. However, if they make quarterly payments and take advantage of deductions and credits, they can qualify for a refund just like W-2 employees.

Paying Your Taxes

If you do end up owing additional taxes, the simplest plan is to pay them when you file your tax return. If you’re filing yourself, you can write a check or use IRS Direct Pay through their website, which allows you to make a payment directly from your bank account with no added fees.

If you are using a tax filing service, they will typically offer to manage the payment process for you as part of their filing assistance.

If your tax bill is larger than expected, you may have the option to pay it in installments rather than in a single lump sum. However, paying in installments usually results in additional interest charges from the IRS.

State and Local Income Taxes

Everything you’ve read so far applies only to federal taxes for the United States. But many individual states also charge income taxes. Some cities and counties do as well.

In that situation, you will need to file a separate tax return for your state and locality. Our 1040 tax calculator doesn’t include that, because every state and locality has its own rules and rates.

But, you can usually deduct your state and local taxes from your federal taxes to lower your taxable income, and this reduces the pain at least a bit.

State and Local Income Taxes

Everything you’ve read so far applies only to federal taxes for the United States. However, many individual states also charge income taxes, and in some cases, cities and counties do as well.

When applicable, you will need to file a separate tax return for your state and locality. Our 1040 tax calculator focuses solely on federal taxes and does not include state or local calculations, as each state and local government sets its own rules and tax rates.

Fortunately, you can typically deduct state and local taxes paid from your federal taxable income, which can help reduce your overall tax burden.

Places with the Lowest Tax Burden

Where this really starts to hurt is when you move up the tax brackets. Someone paying the highest 37% federal tax rate who also lives in a high-tax state, such as California, may end up paying over 50% of their income in combined federal and state taxes.

For this reason, some individuals eventually decide to relocate to a state with lower taxes or no state income tax at all.

If you’re interested, here’s an article examining the states with no income tax where you can learn more.

Smart tax planning is just one part of building and protecting your overall wealth. Whether you’re considering a move, exploring new investment strategies, or planning for the future, having the right resources matters. Start your next step here:

Wherever you are in your financial journey, PillarWM Finder provides independent, research-driven tools to help you make informed, confident decisions.