Itemized deductions: Those who choose to claim actual itemized deductions may deduct the following, subject to many conditions and limitations:

• Medical expenses in excess of 7.5% of adjusted gross income,

• State, local, and foreign taxes,

• Home mortgage interest,

• Contributions to charities,

• Losses on nonbusiness property due to casualty, and

• Deductions for expenses incurred in the production of income in excess of 2% of adjusted gross income.

Capital gains: and qualified dividends may be taxed as part of taxable income. However, the tax is limited to a lower tax rate. Capital gains include gains on selling stocks and bonds, real estate, and other capital assets. The gain is the excess of the proceeds over the adjusted basis (cost less depreciation deductions allowed) of the property. This limit on tax also applies to dividends from U.S. corporations and many foreign corporations. There are limits on how much net capital loss may reduce other taxable income.

Total U.S. Tax Revenue as a % of GDP and Income Tax Revenue as a % of GDP, 1945-2011, from Office of Management and Budget Historicals

Tax credits: All taxpayers are allowed a tax credit for foreign taxes and for a percentage of certain types of business expenses. Individuals are also allowed credits related to education expenses, retirement savings, child care expenses, and a credit for each child. Each of the credits is subject to specific rules and limitations. Some credits are treated as refundable payments.

Alternative Minimum Tax: All taxpayers are also subject to the Alternative Minimum Tax if their income exceeds certain exclusion amounts. This tax applies only if it exceeds regular income tax, and is reduced by some credits.

Tax returns: Individuals must file income tax returns in each year their income exceeds the standard deduction plus one personal exemption, or if any tax is due. Other taxpayers must file income tax returns each year. These returns may be filed electronically. Generally, an individual's tax return covers the calendar year. Corporations may elect a different tax year. Most states and localities follow the federal tax year, and require separate returns.

Tax payment: Taxpayers must pay income tax due without waiting for an assessment. Many taxpayers are subject to withholding taxes when they receive income. To the extent withholding taxes do not cover all taxes due, all taxpayers must make estimated tax payments.

Tax penalties: Failing to make payments on time, or failing to file returns, can result in substantial penalties. Certain intentional failures may result in jail time.

Tax returns may be examined and adjusted by tax authorities. Taxpayers have rights to appeal any change to tax, and these rights vary by jurisdiction. Taxpayers may also go to court to contest tax changes. Tax authorities may not make changes after a certain period of time (generally 3 years).

[edit]Federal income tax rates

Recent federal income brackets and tax rates are published annually by the IRS as "Tax Rate Schedules".

Marginal and average income tax rates in the US for 2009.

[edit]Marginal tax rates

[edit]Marginal tax rates since 2008

[show]Marginal Tax Rates and Income Brackets for 2008

[show]Marginal Tax Rates and Income Brackets for 2009

[show]Marginal Tax Rates and Income Brackets for 2010

[show]Marginal Tax Rates and Income Brackets for 2011

[edit]Marginal tax rates for 2012

Marginal Tax Rate^[9]	Single	Married Filing Jointly or Qualified Widow(er)	Married Filing Separately	Head of Household
10%	$0 – $8,700	$0 – $17,400	$0 – $8,700	$0 – $12,400
15%	$8,701 – $35,350	$17,401 – $70,700	$8,701 – $35,350	$12,401 – $47,350
25%	$35,351 – $85,650	$70,701 – $142,700	$35,351 – $71,350	$47,351 – $122,300
28%	$85,651 – $178,650	$142,701 – $217,450	$71,351 – $108,725	$122,301 – $198,050
33%	$178,651 – $388,350	$217,451 – $388,350	$108,726 – $194,175	$198,051 – $388,350
35%	$388,351+	$388,351+	$194,176+	$388,351+

An individual's marginal income tax bracket depends upon his or her income and tax-filing classification. As of 2012, there are six tax brackets for ordinary income (ranging from 10% to 35%) and four classifications: single, married filing jointly (or qualified widow or widower), married filing separately, and head of household.

An individual pays tax at a given bracket only for each dollar within that bracket's range. For example, a single taxpayer who earned $10,000 in 2009 would be taxed 10% of each dollar earned from the first dollar to the 8,350th dollar (10% × $8,350 = $835.00), then 15% of each dollar earned from the 8,351st dollar to the 10,000th dollar (15% × $1,650 = $247.50), for a total of $1,082.50. Notice this amount ($1,082.50) is lower than if the individual had been taxed at 15% on the full $10,000 (for a tax of $1,500). This is because the individual's marginal rate (the percentage tax on the last dollar earned, here 15%) has no effect on the income taxed at a lower bracket (here the first $8,350 of income taxed at 10%).

This ensures that every rise in a person's pre-tax salary results in an increase of their after-tax salary. However, it does occur for some wage earners that their marginal tax rate goes down once they have reached the taxable limit for the FICA or social security tax which in 2012 was paid at a rate of 4.2% on earned incomes up to $110,100, after which point the wage earners marginal tax rate decreases by 4.2% until the next income tax bracket is reached.

[edit]Example of a tax computation

Average tax rate percentages for the highest-income U.S. taxpayers, 1945-2009