Federal income tax.
In plain English
Federal income tax is the main tax the federal government levies on your income: wages, salary, most investment gains, and other earnings. It is progressive, meaning the rate climbs in steps called brackets as your taxable income rises, so only the dollars inside each bracket are taxed at that bracket's rate. Most workers pay it gradually through paycheck withholding, then settle up when they file a return in the spring. It funds the largest share of federal spending.
01Why it matters
Federal income tax is usually the biggest line taken out of a paycheck, and understanding how brackets and withholding work is the difference between a nasty April surprise and a return that holds no shocks.
02The math, step by step
Say part of your taxable income falls in the 22 percent bracket. Only the dollars above that bracket's threshold are taxed at 22 percent; the income below it is still taxed at the lower bracket rates, so your overall effective rate ends up lower than 22 percent.
03What this is NOT
Federal income tax is NOT charged at one flat rate equal to your top bracket. Only the income inside each bracket is taxed at that bracket's rate, so your overall effective rate is lower than your marginal bracket.
04Receipts
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