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Have been in the US for some time, but never had time to understand how taxes are calculated. Now that I am locked at home, I think it is a good time to learn it. Can anyone please take a look at my calculations and tell whether I understood the concept correctly.

For simplicity let's assume that husband and a wife are bringing home 500k per year and filing under Married filing jointly condition.

Based on this federal tax bracket for 2019, per my understanding this family will pay ~ 125385$ in Federal taxes because of:

  • 19400 * 0.1 = 1940
  • ( 78950 - 19401) * 0.12 ~= 7146
  • (168400 - 78951) * 0.22 ~= 19679
  • (321450 - 168401) * 0.24 ~= 36732
  • (408200 - 321451) * 0.32 ~= 27759
  • (500000 - 408201) * 0.35 ~= 32129

Now if this family lives in CA, based on this bracket (again, married filing jointly) they will pay ~40835$ because of the similar calculations:

  • 17618 * 0.01 ~= 176
  • ( 41766 - 17618) * 0.02 ~= 483
  • ( 65920 - 41766) * 0.04 ~= 966
  • ( 91506 - 65920) * 0.06 ~= 1535
  • (115648 - 91506) * 0.08 ~= 1931
  • (500000 - 115648) * 0.093 ~= 35744

If this family lives in WA, they do not need to pay state tax and if they live in IL they will pay 500000 * 0.0495 = 24750 due to the flat tax rate of 4.95%.

Is my calculation correct?

If it is, just for a future self a python code to quickly see the results.

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  • Do you really mean 'bring home' or gross pay? In US 'take-home' pay is after withholding, but taxes are computed on pay before withholding and after some tax-qualified benefits like health coverage and 401(k); see money.stackexchange.com/questions/124826/… . A quick way to approximate Federal income tax is the estimated tax worksheet(s) i.e. form 1040-ES for that year; 2019 is over, but prior year forms are available on the website using this search
    – dave_thompson_085
    Commented May 8, 2020 at 18:16
  • Note that the federal tax tables (at least) precalculate the values for "more than bracket X" already.
    – chrylis -cautiouslyoptimistic-
    Commented May 8, 2020 at 18:29

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Your calculation for federal tax brackets is roughly correct. One explicit error is that you've got an extra dollar in your subtraction from each of the brackets. It should be (78950 - 19400) * 0.12 and so on. The second problem is that you've ignored the standard deduction. For married, filing jointly it's $24,400 in 2019 - so you'd only pay taxes on $475,600.

And you've also ignored social security and medicare taxes deducted from your paycheck.

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  • Thank you very much. Never knew about standard deduction and SS/medicare taxes, so it was very helpful.
    – random
    Commented May 8, 2020 at 8:31
  • Note SS stops at a per-person wage cap which was $132900 for 2019. But for MFJ over $250k (single/HoH/QW $200k, MFS $125k) add Additional Medicare Tax of 0.9%; see form 8959. And anyone with such high wages and no investment income is doing it massively wrong, and investment income is taxed in several ways all different from wages.
    – dave_thompson_085
    Commented May 8, 2020 at 18:17
  • @random Tax is calculated on your Adjusted Gross Income, which is income after deductions and other adjustments.
    – Barmar
    Commented May 8, 2020 at 18:18
  • 2
    @Barmar: no AGI is after adjustments but before deductions (AGI = Adjusted Gross Income); Taxable Income is after deductions.
    – dave_thompson_085
    Commented May 8, 2020 at 18:20

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