2006 Tax Rate Schedules

Below are the tax rates on ordinary income. Tax rates progressively increase as income increases. The tax rates apply only to the income in each tax bracket range. Tax rates apply only to taxable income. Non-taxable income encompasses tax-free interest on municipal bonds, above-the-line adjustments, itemized deductions or the standard deduction, and personal exemptions. Taxable income is almost always less than your total income.

Capital gains are taxed at different tax rates. Capital gains tax rates are lower than ordinary income tax rates, and are calculated separately.

Note: These tax rate schedules are provided for tax planning purposes. To compute your actual income tax, please see the 2006 Instructions for Form 1040 and the 2006 Tax Tables (both links point to PDF files on the IRS Web site).

Single Filing Status

(Tax Rate Schedule X)

  • 10% on income between $0 and $7,550
  • 15% on the income between $7,550 and $30,650; plus $755.00
  • 25% on the income between $30,650 and $74,200; plus $4,220.00
  • 28% on the income between $74,200 and $154,800; plus $15,107.50
  • 33% on the income between $154,800 and $336,550; plus $37,675.50
  • 35% on the income over $336,550; plus $97,653.00

Married Filing Jointly or Qualifying Widow(er) Filing Status

(Tax Rate Schedule Y-1)

  • 10% on the income between $0 and $15,100
  • 15% on the income between $15,100 and $61,300; plus $1,510.00
  • 25% on the income between $61,300 and $123,700; plus $8,440.00
  • 28% on the income between $123,700 and $188,450; plus $24,040.00
  • 33% on the income between $188,450 and $336,550; plus $42,170.00
  • 35% on the income over $336,550; plus $91,043.00

Married Filing Separately Filing Status

(Tax Rate Schedule Y-2)

  • 10% on the income between $0 and $7,550
  • 15% on the income between $7,550 and $30,650; plus $755.00
  • 25% on the income between $30,650 and $61,850; plus $4,220.00
  • 28% on the income between $61,850 and $94,225; plus $12,020.00
  • 33% on the income between $94,225 and $168,275; plus $21,085.00
  • 35% on the income over $168,275; plus $45,521.50

Head of Household Filing Status

(Tax Rate Schedule Z)

  • 10% on the income between $0 and $10,750
  • 15% on the income between $10,750 and $41,050; plus $1,075.00
  • 25% on the income between $41,050 and $106,000; plus $5,620.00
  • 28% on the income between $106,000 and $171,650; plus $21,857.50
  • 33% on the income between $171,650 and $336,550; plus $40,239.50
  • 35% on the income over $336,550; plus $94,656.50

Tax Calculation Example

Mary is a single taxpayer with $350,000 of taxable income. Her income is taxed in each of the tax brackets, as follows:

  • $755.00 (tax on the first $7,550 of Mary's income, taxed at the 10% rate), plus
  • $3,465.00 (tax on the income between $7,550 and $30,650, taxed at the 15% rate), plus
  • $10,887.50 (tax on the income between $30,650 and $74,200, taxed at the 25% rate), plus
  • $22,568.00 (tax on the income between $74,200 and $154,800, taxed at the 28% rate), plus
  • $59,977.50 (tax on the income between $154,800 and $336,550, taxed at the 33% rate), plus
  • $4,707.50 (tax on the income over $336,550, taxed at the 35% rate), for a grand total tax of
  • $102,360.50.

Mary's income tax is $102,361 (rounding up). This tax consists of $4,707.50 tax on the amount over $336,550 (the income in the 35% tax bracket) plus $97,653.00 (the tax on income in the lower tax brackets).

Mary's marginal tax rate is 35%. The next dollar Mary earns will be taxed at 35%. However, Mary's average tax rate is 29% (total tax divided by taxable income). On average Mary is paying only 29 cents for every dollar of taxable income she earns. Mary's average tax rate is lower than her marginal tax rate because most of her income is taxed at lower tax rates.

We can compare the changes in the marginal tax rates by comparing Mary's total tax using 2005 tax rates and 2004 tax rates.

If Mary had the same taxable income of $350,000 in 2006, 2005, and 2004, her total tax liability would have been $102,970 in 2005 and $103,408 in 2004. Mary's taxes are lower in 2006 because of changes in the income tax brackets.

 

Source: Internal Revenue Service, Revenue Procedure 2005-70.