Federal income tax is money the U.S. government collects from individuals, businesses, estates, and trusts based on their income. That includes wages, investments, and business profits. The IRS (Internal Revenue Service) collects it, and the money helps fund government programs, services, and operations at the national level.
Who pays federal income tax?
Anyone who earns income. Individuals pay based on what they make in a given year. Businesses pay taxes on profits. Estates and trusts pay taxes on income from investments and other sources. The amount owed depends on taxable income, which factors in deductions and exemptions.
Why is federal income tax important?
It keeps the government running. Here’s how:
- Funds essential services – Pays for national defense, healthcare, education, infrastructure, and social programs.
- Promotes fairness – Higher earners pay higher rates, helping redistribute wealth.
- Stabilizes the economy – Tax policies can encourage spending, saving, and investment, helping balance economic ups and downs.
- Supports social programs – Funds Social Security, Medicare, Medicaid, food assistance, and unemployment benefits.
- Maintains infrastructure – Helps build and repair roads, bridges, public transportation, and utilities.
- Pays for public services – Supports law enforcement, firefighters, and emergency responders.
How is federal income tax calculated?
It’s based on your taxable income—what you earn minus deductions and exemptions. The U.S. has a progressive tax system, meaning the more you make, the higher your tax rate. Different income levels fall into different tax brackets, with rates increasing as income rises.
How much is federal income tax?
It depends on your income, filing status, and deductions. Here are the 2023 tax brackets:
| Tax Rate | Single Filer | Married Filing Jointly | Married Filing Separately | Head of Household |
| 10% | Up to $11,000 | Up to $22,000 | Up to $11,000 | Up to $15,700 |
| 12% | $11,001 – $44,725 | $22,001 – $89,450 | $11,001 – $44,725 | $15,701 – $59,850 |
| 22% | $44,726 – $95,375 | $89,451 – $190,750 | $44,726 – $95,375 | $59,851 – $95,350 |
| 24% | $95,376 – $182,100 | $190,751 – $364,200 | $95,376 – $182,100 | $95,351 – $182,100 |
| 32% | $182,101 – $231,250 | $364,201 – $462,500 | $182,101 – $231,250 | $182,101 – $231,250 |
| 35% | $231,251 – $578,125 | $462,501 – $693,750 | $231,251 – $346,875 | $231,251 – $578,100 |
| 37% | $578,126 and up | $693,751 and up | $346,876 and up | $578,101 and up |
When’s the tax deadline?
April 15th. If it falls on a weekend or holiday, the deadline shifts to the next business day. Need more time? You can file for an extension, which pushes the deadline to October 15th. Just know that an extension gives you more time to file, not to pay. If you owe taxes, you still need to pay by April 15th to avoid penalties and interest.
What is federal income tax withholding?
It’s the money your employer takes out of your paycheck for federal taxes before you even see it. The IRS requires employers to withhold taxes based on the info you provide on your W-4 form, including:
- Filing status
- Number of allowances
- Additional requested withholdings
The amount withheld depends on your taxable wages and tax bracket. If too much is withheld, you’ll get a refund when you file your taxes. If not enough is withheld, you might owe money. That’s why keeping your W-4 up to date matters.