What is a tax rate?
A tax rate is the percentage at which an individual or company is taxed. That percentage is determined by factors like your filing status, income, and where you live.
Finding out how much you are expected to pay for taxes is crucial to ensuring that you are able to set aside enough money throughout the year to fulfill your tax obligations. Your tax rate is crucial to finding out your eventual tax liabilities. No one likes a surprise bill from the IRS or the state at the end of the year. Here are some ways you can stay on top of your taxes.
Find your tax bracket
The tax bracket that you fall under will depend on your taxable income and your filing status. You can refer to the chart below for 2022:
| Rate | Married Filing Jointly | Single | Head of Household | Married Filing Separately |
|---|---|---|---|---|
| 10% | $20,550 or less | $10,275 or less | $14,650 or less | $10,275 or less |
| 12% | Over $20,550 | Over $10,275 | Over $14,650 | Over $10,275 |
| 22% | Over $83,550 | Over $41,775 | Over $41,775 | Over $41,775 |
| 24% | Over $178,150 | Over $89,075 | Over $89,075 | Over $89,075 |
| 32% | Over $340,100 | Over $170,050 | Over $170,050 | Over $170,050 |
| 35% | Over $431,900 | Over $215,950 | Over $215,950 | Over $215,950 |
| 37% | Over $647,850 | Over $539,900 | Over $539,900 | Over $323,925 |
Find your tax rate
Your tax rate is your total tax owed divided by your total income. If you are a W2 employee, your employer calculates your tax rate. However, If you are a 1099 income earner, you are responsible for ensuring that you set aside funds for taxes yourself.
Depending on the state you live in and other external factors, you will fall under one or more of these three main tax rate categories.
1. Progressive Taxes
Under a regressive tax system, high-income taxpayers pay more taxes than low-income taxpayers. This is the most commonly used tax system in the U.S (and is the federal tax rate system outlined in the table above).
2. Proportional taxes
Under a proportional tax system, all taxpayers pay the same amount in taxes regardless of income. Essentially, this is a flat tax.
3. Regressive taxes
Under a regressive tax system, high-income taxpayers pay fewer taxes than low-income taxpayers.
Decide how much to set aside for taxes
If you’re a 1099 earner, then you’ll have to decide how much to withhold for taxes yourself. Catch can help you set up the right withholding percentage. We’ll take you through a simple process to predict your tax burden, then recommend a percentage to automatically withhold. You can set the percentage and forget it, or you can adjust the percentage anytime.
As a reminder, this guide intends to educate you on general tax topics that should help you make a more informed decision about your taxes. This is not a substitute for speaking with a tax professional.