Updated on March 5th, 2018

2017 Federal income tax brackets for taxes due April 17th, 2018

There are seven tax brackets and depending on your taxable income, as a taxpayer you fall into one of them. The United States has a progressive federal tax system. It means that depending on your tax owed, you will be taxed at marginal tax rate.

The progressive tax system implies that government taxes people according to their income. For example, high taxable incomes are subject to higher tax rates and people with lower taxable income are subject to lower tax rates. The marginal tax rate is the rate which the remaining portion of your income is taxed at. In the U.S. it starts at 10% and goes as follows: 15%, 25%, 28%, 33%, 35% or 39.6%.

Contact us here if you need a help with your federal tax return. Only a few weeks left before April 17th deadline!

Now you need to understand that being in the 25% tax bracket doesn’t mean that you pay 25% on everything you make. For example, you are a single filer and you have $90,000 in taxable income. For 2017 tax return, you are in 25% tax bracket but it doesn’t mean you pay 25% on all $90,000. You actually pay according to the following structure:

  1. 10% tax rate applies to the first $9,325
  2. A chunk of income between $9,326 and $37,950 is taxed at 15% rate
  3. Now rest part of your income is in 25% tax bracket and that is the part of income when you’d pay 25%.
SINGLE FILING
If you make...your marginal rate is...you will be taxed
$0 - $9,32510%10% of taxable income
$9,325 - $37,95015%$932.50 + 15% of excess over $9,325
$37,950 – $91,90025%$5,226.25 + 25% of excess over $37,950
$91,900 – $191,65028%$18,713.75 + 28% of excess over $91,900
$191,650 – $416,70033%$46,643.75 + 33% of excess over $191,650
$416,700 - $418,40035%$120,910.25 + 35% of excess over $416,700
$418,400+39.6%$121,505.25 + 39.6% of excess over $418,400
MARRIED, FILING JOINTLY
If you make...your marginal rate is...you will be taxed
$0 – $18,65010%10% of taxable income
$18,650 – $75,90015%$1,865 + 15% of excess over $18,650
$75,900 – $153,10025%$10,452.50 + 25% of excess over $75,900
$153,100 – $233,35028%$29,752.50 + 28% of excess over $153,100
$233,350 – $416,70033%$52,222.50 + 33% of excess over $233,350
$416,700 - $470,70035%$112,728 + 35% of excess over $416,700
$470,700+39.6%$131,628 + 39.6% of excess over $470,700
MARRIED, FILING SEPARATELY
If you make...your marginal rate is...you will be taxed
$0 - $9,32510%10% of taxable income
$9,325 - $37,95015%$932.50 + 15% of excess over $9,325
$37,950 - $76,55025%$5,226.25 + 25% of excess over S37,950
$76,550 - $116,67528%$14,876.25 + 28% of excess over S76,550
$116,675 - $208,35033%$26,111.25 + 33% of excess over $116,675
$208,350 - $235,35035%$56,364 + 35% of excess over $208,350
$235,350+39.6%$65,814 + 39.6% of excess over S235,350
HEAD OF HOUSEHOLD
If you make...your marginal rate is...you will be taxed
$0 – $13,35010%10% of taxable income
$13,350 - $50,80015%$1,335 + 15% of excess over $13,350
$50,800 - $131,20025%$6,952.50 + 25% of excess over S50,800
$131,200 - $212,50028%$27,052.50 + 28% of excess over S131.200
$212,500 - $416,70033%$49,816.50 + 33% of excess over S212.500
$416,700 - $444,50035%$117,202.50 + 35% of excess over $416.701
$444,500+39.6%$126,950 + 39.6% of excess over S444,550

One of the biggest myths about the Foreign Earned Income Exclusion is that income taxed above and beyond the FEIE is taxed at tax rates starting at 10%. Well, it’s not correct.

Remember: You won’t pay the tax rate above on your entire 2017 income. Why?

  • Reason #1: You get to subtract tax deductions and exemptions to determine your taxable income.
  • Reason #2: Each taxable income is divided into blocks according to these tax brackets and it gets taxed at the corresponding rate.

How to lower your tax bracket?

To reduce tax bill, you need to take advantage of available deductions and tax credits as they can significantly reduce your taxable income and allow you to be in a lower bracket.

There is a difference in how they affect you:

  • Tax credits directly reduce the amount of tax you owe but they do not make the impact on which bracket you are currently in;
  • Tax deductions reduce how much of your income is taxable. They lower it by percentage of your highest federal income tax bracket.

What about New Tax Code changes?

New tax law doesn’t affect 2017 year’s return, which is due April 17th, 2018.

But there are a few significant changes for your next 2018 federal tax return. For example such as new federal tax brackets, doubled standard deductions and elimination of the personal exemption. We have prepared a free guide on tax reform and you can download it here to learn more about the changes a U.S. expat has to be aware of.

Contact us if you are looking for expert help with your tax situation!