Understanding Total Tax: Definition, Calculation, and Real-World Examples

Total tax, within the realm of personal income tax, represents the aggregate sum of taxes owed by a taxpayer over the course of a year.

The progressive nature of total tax hinges on the taxpayer’s income. Annually, the Internal Revenue Service (IRS) delineates income thresholds across seven tax brackets, ranging from 10% to 37%.

The total tax figure emerges as the penultimate step in the tax calculation, accounting for all credits and deductions applicable to the taxpayer, excluding tax payments made throughout the year. A subsequent comparison with payments made determines whether a refund is due or a balance is owed.

For a married couple filing jointly in 2022, the lowest total tax is 10%, applicable to income up to $20,550 ($22,000 for 2023). Consequently, if the couple earned $19,000, their federal income tax liability would amount to $1,900. Conversely, a high-earning couple with an income surpassing $647,850 ($693,750 for 2023) faces the highest bracket of 37%.

The graduated tax system ensures that each bracket imposes its respective rate only on the income exceeding the threshold. For instance, a couple earning $80,000 in 2022 would incur a total tax of $17,600.

Single taxable income tax brackets and rates, 2022 and 2023
Rate | Taxable income bracket | Tax owed
10% | $0 to $10,275 | $1,028 or 10% of taxable income
12% | $10,276 to $41,775 | $1,028 plus 12% of the excess over $10,275
22% | $41,776 to $89,075 | $4,807 plus 22% of the excess over $41,775
24% | $89,076 to $170,050 | $15,213 plus 24% of the excess over $89,075
32% | $170,051 to $215,950 | $34,647 plus 32% of the excess over $170,050
35% | $215,951 to $539,900 | $49,334 plus 35% of the excess over $215,950
37% | Over $539,900 | $162,716 plus 37% of the excess over $539,900

Single taxable income tax brackets and rates for 2023
Rate | Taxable income bracket | Tax owed
10% | $0 to $11,000 | $1,100 or 10% of taxable income
12% | $11,001 to $44,725 | $1,100 plus 12% of the excess over $11,000
22% | $44,726 to $95,375 | $5,147 plus 22% of the excess over $44,725
24% | $95,376 to $182,100 | $16,290 plus 24% of the excess over $95,375
32% | $182,101 to $231,250 | $37,103 plus 32% of the excess over $182,100
35% | $231,251 to $578,125 | $52,831 plus 35% of the excess over $231,250
37% | Over $578,125 | $174,237 plus 37% of the excess over $539,900

Married filing jointly taxable income tax brackets and rates, 2022 and 2023
Rate | Taxable income bracket | Tax owed
10% | $0 to $20,550 | 10% of taxable income
12% | $20,551 to $83,550 | $2,055 plus 12% of the excess over $20,550
22% | $83,551 to $178,150 | $9,615 plus 22% of the excess over $83,550
24% | $178,151 to $340,100 | $30,427 plus 24% of the excess over $178,150
32% | $340,101 to $431,900 | $69,295 plus 32% of the excess over $340,100
35% | $431,901 to $647,850 | $98,671 plus 35% of the excess over $431,900
37% | Over $647,850 | $174,253 plus 37% of the excess over $647,850

Married filing jointly taxable income tax brackets and rates for 2023
Rate | Taxable income bracket | Tax owed
10% | $0 to $22,000 | 10% of taxable income
12% | $22,001 to $89,450 | $2,200 plus 12% of the excess over $22,000
22% | $89,451 to $190,750 | $10,294 plus 22% of the excess over $89,450
24% | $190,751 to $364,200 | $32,580 plus 24% of the excess over $190,750
32% | $364,201 to $462,500 | $74,208 plus 32% of the excess over $364,200
35% | $462,501 to $693,750 | $105,664 plus 35% of the excess over $462,500
37% | Over $693,750 | $186,601 plus 37% of the excess over $693,750

Source: Internal Revenue Service.

Total tax encapsulates income, the alternative minimum tax, and self-employment tax. Calculated post-deductions, these deductions, following the latest tax reform, have been streamlined and somewhat increased for most filers.

For instance, under the pre-2018 tax system, married couples filing jointly were entitled to a standard deduction of $13,850. In 2022, this increased significantly to $25,900, with an additional $1,800 for 2023. However, the government simultaneously eliminated the individual exemption of $4,050 (or $8,100 for a couple).

The augmented standard deduction implies that fewer homeowners can claim deductions like the mortgage interest deduction, as these must surpass the standard deduction threshold to take effect.

It’s crucial to note that while total tax is indeed comprehensive, it is not permanent. Various provisions of the 2017 tax reform act, particularly those benefiting middle-class taxpayers, are set to expire at the end of 2025. Without Congressional action, total tax for most filers will revert to previous levels.

Total tax is influenced by factors such as income, deductions, credits, and the taxpayer’s filing status. The progressive tax brackets established by the IRS also play a crucial role in determining the total tax amount.

Deductions reduce the taxable income, consequently lowering the total tax liability. Understanding the impact of deductions is essential in managing and optimizing your overall tax obligations.

Yes, total tax encompasses income tax, but it does not include other specific taxes such as property tax, sales tax, or corporate taxes. These taxes fall outside the scope of total tax calculations.

Yes, total tax can change over time due to various factors, including amendments to tax laws, changes in income levels, and modifications to deductions and exemptions. It’s essential to stay informed about tax law updates to understand potential impacts on your total tax.

The sunset provisions refer to the expiration of certain tax rules introduced in the 2017 tax reform act. Understanding these provisions is crucial as they may result in changes to total tax calculations, especially for middle-class taxpayers, by the end of 2025 unless new legislation is enacted.