The federal income tax is the tax levied by the Internal Revenue Service on the annual earnings of individuals, corporations, trusts, and other legal entities.
Federal income tax is used for a variety of expenses ranging from building and repairing the country’s infrastructure to improving education and public transportation and providing disaster relief.
Formula to calculate federal income tax.
To calculate the income tax, you will have to use the tax rates to calculate it.
Suppose the federal tax table is as follows and you are asked to calculate the tax of an employee whose salary is $ 30,000.
|Income||Federal Tax Rate|
|0 to 15,000||10%|
|15,001 to 30,000||15%|
|30,001 to 45,000||20%|
|45,001 to 60,000||25%|
|60,001 to 75,000||30%|
So to calculate the federal income tax, we will tax her up to to 15%, which is where her income gap lies.
Therefore for the first 15,000, we will tax her 10%.
= 10% x 15,000
Then subtract the 15,000 from the 30,000 and tax it using 15%.
= 15% x 15,000
Ten add the tax together to get her federal income tax.
= 1,500 + 2,250
= $ 3,750