What Is a Tax Rate?

A tax rate is a percentage at which an individual or corporation's income is taxed. The United States uses a progressive tax rate system imposed by the federal government and many states. The federal income tax brackets for 2024 and 2025 are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

With such a system, the tax rate charged increases as the amount of the person's or entity's taxable income increases. A progressive tax collects more money from taxpayers with higher incomes.

Understanding Tax Rates

To help build and maintain a nation's infrastructure as well as to support social services, a government taxes its residents. The tax collected is used for the betterment of the nation, society, and all living in it. In the U.S. and other countries, a tax rate is applied to taxpayer income.

Whether earned from wages or salary, investment income such as dividends and interest, capital gains from investments, o🦩r profits made from selling goods or services, a percentage of earned and unearned income is remitted to the government.

For income tax, the tax rate is the percentage of an individual's taxable income or a corporation's earnings owed to state, federal, and, in some cases, municipal governments. The tax rate applied to an individual’s income depends on the 澳洲幸运5开奖号码历史查询:marginal tax bracket. The marginal tax rate used by the U.S. goꦕvernment is indicative of its progressive tax s🦩ystem.

Current Tax Rates

For individuals, the dollar threshold for each tax rate is dependent upon the status of the filer, whether they are single, the 澳洲幸运5开奖号码历史查询:head of a household, 澳洲幸运5开奖号码历史查询:married filing separately, or 澳洲幸运5开奖号码历史查询:married filing jointly. The marginal tax brackets for 2024 and 2025 are:

A single individual who earns $65,000 in 2024 will be taxed as follows: 10% on the first $11,925; 12% on the next $36,550 (the amount over $11,000 up to $48,475); then 22% on the remaining $16,525 (the amount over $48,475 up to $103,350), all of which equals $9,214.

Another individual who earns $150,000 will be taxed 10% on the first $11,925; 12% on the next $36,550; 22% on the next $54,875 (the amount over $48,475 up to $103,350); then 24% on the remaining $46,650 (the amount of income that falls between $103,350 and $197,300), all of which equals $28,847.

Following this example, the single taxpayer who falls in the third marginal tax b🦩racket will pay less tax than the single taxpayer who falls in the fourth and higher bracket.

Although these taxpayers fall in the third and fourth marginal brackets, they do not pay flat rates of 22% an𒅌d 24%, respectively, on all of their income due to the nature of the marginal tax calculation.

If they did, the first individual would pay 22% x $65,000 = $14,300; the second would pay 24% x $150,000 = $36,000.

In total, individual A pays an effective rate of 14.18% ($9,214 ÷ $65,000), and the individual with the higher income pays a rate of 19.23% ($28,847 ÷ $150,000). These rates are called effective tax rates ꩵand represent the actual percentage at which the tax is levied for a tax 🐼year.

Sales and Capital Gains Tax Rates

Tax rates also apply as 澳洲幸运5开奖号码历史查询:sales tax on goods and services, 澳洲幸运5开奖号码历史查询:real property tax, 澳洲幸运5开奖号码历史查询:short-term capital gains tax, and 澳洲幸运5开奖号码历史查询:long-term capital gains tax.

Sales Tax Rates

When a consumer purchases certain goods and services from a retailer, a sales tax is applied to the sales price of the commodity at the point of sale. Since sales tax is governed by individual state governments, the sales tax rate will vary from state to state. In Georgia, the rate is 4%, while the tax rate in California is 7.25%.

Capital Gains Tax Rates

Income gained from investments is categorized as earnings, and 澳洲幸运5开奖号码历史查询:tax rates on capital gains and dividends apply. When the value of an investment rises and the security is sold for a profit, the t🤡ax rate that the investor pays depends on how long theꩲy hold the asset.

The tax rate of a short-term investment held for is equal to the investor’s ordinary income tax. Individuals in the 22% marginal tax bracket will pay 22% on short-term capital gains.

The tax rate on 澳洲幸运5开奖号码历史查询:profits from investments held longer than a year ranges from 0% to 20%.

For tax year 2024:

Individuals with taxable income at or below $47,025 pay 0%. If they have income over $47,025 to $518,900, they pay 15%. Those individual investors with income over $518,900 pay a 20% tax rate on capital gains.

Married individuals filing jointly and surviving spouses with taxable income at or below $94,050 pay 0%. If they have income over $94,050 to $583,750, they pay 15%. Those married filing jointly investors with income over $583,750 pay a 20% tax rate on capital gains.

Heads of households (HOH) with taxable income at or below $63,000 pay 0%. If they have income over $63,000 to $551,350, they pay 15%. Those HOH investors with income over $551,350 pay a 20% tax rate on capital gains.

Married individuals filing separately with taxable income at or below $47,025 pay 0%. If they have income over $47,025 to $291,850, they pay 15%. Those married individuals filing separately with such income over $291,850 pay a 20% tax rate on capital gains.

澳洲幸运5开奖号码历史查询:Qualified dividends are subject to the same tax rate schedule for long-term capital gains. Non-qualified dividends have the same tax rates as short-term capital gains.

For tax year 2025:

Individuals with taxable income at or below $48,350 pay 0%. If they have income over $48,350 to $533,400, they pay 15%. Those individual investors with income over $533,400 pay a 20% tax rate on capital gains.

Married individuals filing jointly and surviving spouses with taxable income at or below $96,700 pay 0%. If they have income over $96,700 to $600,050, they pay 15%. Those married filing jointly investors with income over $600,050 pay a 20% tax rate on capital gains.

Heads of households (HOH) with taxable income at or below $64,750 pay 0%. If they have income over $64,750 to $566,700, they pay 15%. Those HOH investors with income over $566,700 pay a 20% tax rate on capital gains.

Married individuals filing separately with taxable income at or below $48,350 pay 0%. If they have income over $48,350 to $300,000, they pay 15%. Those married individuals filing separately with income over $300,000 pay a 20% tax rate on capital gains.

Tax Rates Abroad

Tax rates vary from country to country. Some countries implement a progressive tax system, while others use 澳洲幸运5开奖号码历史查询:regressive or 澳洲幸运5开奖号码历史查询:proportional tax rates. A regressive tax schedule is one in which the tax rate increa🎀ses as the taxable amount decreases.

The proportional or flat tax rate system applies the same tax rates to all taxable amounts, regardless of income level. Bolivജia and Greenland are examples of co🏅untries that have this system of taxes in place.

The Bottom Line

A tax rate is a percentage at which the income of an individual or corporation is taxed. The U.S. imposes a progressive tax, where the higher the individual's income, the greater the percentage of tax is paid.

Tax rates are also applied as sales tax on goods and services or as capital gains tax on investments. Some nations may impose a progressive tax, while others may charge a flat tax rate or a regressive tax rate.