The Mathematics of Money

Copyright © 2008, The McGraw-Hill Companies, Inc.

If Taxable

Income is Over But not Over The Tax is:

$0 $15,100 10% of the amount over $0

$15,100 $61,300 $1,510.00 plus 15% of the amount over $15,100

$61,300 $123,700 $8,440.00 plus 25% of the amount over $61,300

$123,700 $188,450 $24,040.00 plus 28% of the amount over $123,700

$188,450 $336,550 $42,170.00 plus 33% of the amount over $188,450

$336,550 No limit $91,043.00 plus 35% of the amount over $336,550

2006 INCOME TAX RATES—MARRIED FILING JOINTLY OR QUALIFYING WIDOW(ER)^3

Note that different tax rates are used, depending on whether the taxes are being filed for a

single individual or for a married couple filing together.

Example 9.2.2 Calculate the 2006 income tax for Luisa and Alfonso (from

Example 9.2.1).

Their taxable income was $45,079. Since this is more than $15,100 but less than $61,300,

according to the table their taxes should be $1,510.00 plus 15% of the amount over $15,100.

Then $45,079  $15,100  $29,979, so applying a 15% rate to this would give (0.15)

($29,979)  $4,496.85. So their total tax would be $1,510.00 
 $4,496.85  $6,006.85.

Alternatively, we could have written the calculation in this way:

Tax  $1,510.00 
 (0.15)($45,079  $15,100)

 $1,510.00 
 (0.15)($29,979)

 $1,510.00 
 $4,496.85  $6,006.85

The income levels at which the different tax rates apply depend on the taxpayer’s filing

status. The table we used for this example was for married couples filing their taxes jointly.

Most taxpayers file as either “single” or “married filing jointly.” Taxpayers are also allowed

to file as “head of household” or “married filing separately.” The 2006 tax rate tables for all

four of these filing categories are given below:^4

If Taxable

Income is Over But not Over The Tax is:

$0 $7,550 10% of the amount over $0

$7,550 $30,650 $755 plus 15% of the amount over $7,550

$30,650 $74,200 $4,220.00 plus 25% of the amount over $30,650

$74,200 $154,800 $15,107.50 plus 28% of the amount over $74,200

$154,800 $336,550 $37,675.50 plus 33% of the amount over $154,800

$336,550 No limit $97,653.00 plus 35% of the amount over $336,550

2006 INCOME TAX RATES—SINGLE TAXPAYERS

If Taxable

Income is Over But not Over The Tax is:

$0 $15,100 10% of the amount over $0

$15,100 $61,300 $1,510.00 plus 15% of the amount over $15,100

$61,300 $123,700 $8,440.00 plus 25% of the amount over $61,300

$123,700 $188,450 $24,040.00 plus 28% of the amount over $123,700

$188,450 $336,550 $42,170.00 plus 33% of the amount over $188,450

$336,550 No limit $91,043.00 plus 35% of the amount over $336,550

2006 INCOME TAX RATES—MARRIED FILING JOINTLY OR QUALIFYING WIDOW(ER)

9.2 Income and Payroll Taxes 387

(^3) Source: U.S. Internal Revenue Service, http://www.irs.gov. Reformatted.
(^4) Source: U.S. Internal Revenue Service, http://www.irs.gov. Reformatted.