2016 Income Tax & Marginal Tax Rates Explained

Understanding this concept will help you better understand many other posts on the website.

Knowing exactly how your total income tax is calculated and what happens when you move to a higher tax bracket will provide you with the knowledge you need to make better tax planning decisions throughout the year.

As you will see in the example below jumping to a higher tax bracket does NOT mean all of your income will be taxed at a higher tax rate. Simply put the income you make over your current marginal tax rate income cap is taxed at the new rate.

Example  : A Taxpayer has $85,000 of Taxable income in 2016. Below we will determine the total income tax and the marginal tax rate if the taxpayer is :

  • A Single Individual
  • A Married Couple
  • A C Corporation

In order for us to determine total income tax payable and the marginal tax rate we need to access the IRS website and pull the 2016 tax tables. I have provided the tables below for example purposes.

2016 Single Taxpayer

2016- IRS Single Tax Payer Rates

  • In this case our single taxpayer is in the 25% Marginal tax bracket. He/she will have a total income tax of:
  • $5183.75 +((85,000-37,650)*.25)
  • $5183.75 + (47,350*.25)
  • $5183.75 + $11,837.50
  • Total income tax for Single Taxpayer = $17,021.25

Next year if the taxpayer makes $95,000 only the amount over $91,150 will be taxed at the higher 28% tax rate, any income below that will still be taxed at the 25% rate.




2016 Married Filing Jointly and Surviving Spouses


  • In this case our Married Joint Filers and Surviving Spouses are in the 25% marginal tax bracket also. Total Income Tax for Joint Filers/Surviving Spouses =
  • 10,367.50 + ((85,000-75,300)*.25))
  • 10,367.50 + ((9,700)*.25)
  • 10,367.50+ 2,425
  • Total Income Tax for Joint Filers / Surviving Spouses = $12,792.50






2016 Corporation

  • In this case our Corporate Tax Payer is in the 34% marginal tax bracket.
  •  Income Tax for Corporate Tax Payers with $85,000 in income = 
    • In the 0-50k bracket 50k of income is taxed at 15%:
      • $50,000*.15 = $7500
    • Income Tax In the 50k-75k bracket 25k of additional income is taxed at 25%:
      • $25,000*.25 = $6250 Income Tax
    • In the 75k-100k bracket we have an additional 10k that will be taxed at 34% $10,000 *.34 = $3400 Income Tax
  • Total Income Tax for Corporate Tax Payers with $85,000 in income = $7,500+ $6,250+ $3,400
  • Total Income Tax due= $17,150 Income Tax for 2016

For discussion of the different types of tax systems and structures and how they could affect you see our other post.

2 Comments on 2016 Income Tax & Marginal Tax Rates Explained

  1. You really make it seem so easy with your presentation but I find this topic to be really something which
    I think I would never understand. It seems too complicated and very broad for me.
    I’m looking forward for your next post, I will try to get the hang of it!

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