Marginal tax rate – This is the tax rate paid on the next dollar of income. Among sources of other income are business income, farm income, rental real estate, alimony, unemployment compensation and nonqualified dividends.Īnother callout helpful in explaining federal tax income tax rates is understanding the difference between two terms - marginal tax rate and effective tax rate. Examples of ordinary income include salaries and wages, interest earned, income from self-employment and taxable IRA distributions. One note for federal income tax rates is that they apply to ordinary income. To see the 20 tax rates and income ranges, check out this article where we outline what the current tax brackets are. Most taxpayers are familiar with this concept - You typically see these percentages represented with a table along with ranges of income. Federal income tax ratesįirst let’s talk about federal income tax rates. Not sure which one? Don’t worry! We’ll outline the types of tax rates and the situations when you’ll encounter them in this post. Is it the capital gains tax rate, marginal tax rate, or the withholding tax rate on bonuses (what some people think of as a “bonus tax rate”) you’re looking for? When someone asks about the current tax rates, they could be referring to a number of different types of tax rates. The question of tax rates is no different. Tax questions often have complex answers.
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