Example of a tax computation
Income tax for year 2011:
Single taxpayer, no children, under 65 and not blind, taking standard deduction;
$40,000 gross income – $5,800 standard deduction – $3,700 personal exemption = $30,500 taxable income
$8,500 × 10% = $850.00 (taxation of the first income bracket)
$30,500 – $8,500 = $22,000.00 (amount in the second income bracket)
$22,000.00 × 15% = $3,300.00 (taxation of the amount in the second income bracket)
Total income tax is $850.00 + $3,300.00 = $4,150.00 (10.375% effective tax)
Note that in addition to income tax, a wage earner would also have to pay Federal Insurance Contributions Act tax (FICA) (and an equal amount of FICA tax must be paid by the employer):
$40,000 (adjusted gross income)
$40,000 × 4.2%[7] = $1,680 (Social Security portion)
$40,000 × 1.45% = $580 (Medicare portion)
Total FICA tax = $2,260 (5.65% of income)
Total Federal tax of individual = $6,410.00 (16.025% of income)
Further information: Rate schedule (federal income tax)
