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Income Tax Calculator: Progressive Brackets You Define
This calculator does not know any country's rates. You enter up to five brackets, an allowance and credits from your tax authority, and it shows tax owed, take-home pay and your effective and marginal rates.
How progressive brackets work
In a progressive system, the rate rises with income, but each rate applies only to the slice of income inside its bracket. Taxable income is first reduced by any allowance, then each slice is taxed separately and the slices are added together.
Taxable income = max(0, gross income − allowance)
Tax = sum of (income inside each bracket × that bracket's rate)
For the default example, taxable income is 55,000. The first 15,000 is taxed at 10%, which is 1,500. The next 35,000 up to 50,000 is taxed at 20%, which is 7,000. The final 5,000 falls in the 30% bracket, which is 1,500. Total tax before credits is 10,000.
Effective rate versus marginal rate
The marginal rate is the rate on your next unit of income. In the example it is 30%. The effective rate is total tax divided by gross income, and it is always lower than the top rate you reach, because the lower slices are taxed less. After the 500 credit the example worker pays 9,500, an effective rate of 15.8% of gross income, even though the marginal rate is 30%.
This explains a common myth. Moving into a higher bracket never reduces your take-home pay, because only the extra income is taxed at the higher rate. A rise of 1,000 in the 30% bracket adds 700 to take-home pay before other effects.
Allowances versus credits
An allowance or deduction lowers the income that is taxed, so it saves tax at your marginal rate. A credit lowers the tax bill itself, so a credit of 500 saves exactly 500 whatever your bracket. Because of that difference, a credit is worth the same to everyone while an allowance is worth more to higher earners.
Here the credit cannot take the tax below zero. Some systems pay out unused credits and others discard them, which this tool does not model. Check whether the allowance in your country shrinks at higher incomes, since a phase-out changes the marginal rate in that range.
Setting it up and what is left out
- Find your tax authority's current bracket table and decide whether its limits are for taxable income (after allowance) or for gross income. Enter taxable-income limits here.
- Type the limits and rates. To use fewer than five brackets, clear the limit of the last bracket you need.
- Add any allowance and credits that apply to you.
Not included: social insurance, payroll contributions, local or regional taxes, tax on investment income, and rules that treat a married couple or family together. The result is an estimate for planning, not a tax return or advice. For a pay conversion before tax, use the salary calculator.
Worked example
A worker earns 60,000 a year with a tax-free allowance of 5,000 and 500 of credits, under an example bracket scheme of 10%, 20%, 30%, 35% and 40%.
Inputs
| Annual gross income | 60000 |
|---|---|
| Tax-free allowance or deduction | 5000 |
| Tax credits | 500 |
| Bracket 1 ends at (taxable income) | 15000 |
| Bracket 1 rate | 10 % |
| Bracket 2 ends at | 50000 |
| Bracket 2 rate | 20 % |
| Bracket 3 ends at | 100000 |
| Bracket 3 rate | 30 % |
| Bracket 4 ends at | 200000 |
| Bracket 4 rate | 35 % |
| Bracket 5 rate (above bracket 4) | 40 % |
Result
Take-home pay of 50,500.00 a year, an effective rate of 15.83%.
| Gross income | 60,000.00 |
|---|---|
| Allowance applied | 5,000.00 |
| Taxable income | 55,000.00 |
| Tax before credits | 10,000.00 |
| Credits used | 500.00 |
| Tax payable | 9,500.00 |
| Take-home pay (per year) | 50,500.00 |
| Take-home pay (per month) | 4,208.33 |
| Effective tax rate | 15.83% |
| Marginal rate on the next unit earned | 30.00% |
Tax by bracket
| Bracket | Taxable income range | Rate | Income in bracket | Tax |
|---|---|---|---|---|
| Bracket 1 | 0 to 15,000 | 10.00% | 15,000.00 | 1,500.00 |
| Bracket 2 | 15,000 to 50,000 | 20.00% | 35,000.00 | 7,000.00 |
| Bracket 3 | 50,000 to 100,000 | 30.00% | 5,000.00 | 1,500.00 |
| Bracket 4 | 100,000 to 200,000 | 35.00% | 0.00 | 0.00 |
| Bracket 5 | 200,000 and above | 40.00% | 0.00 | 0.00 |
- Brackets and rates are exactly what you typed. The defaults are teaching examples and are not any country's real rates.
Financial disclaimer: Results are estimates for planning and education. They are not financial, tax or legal advice. Fees, taxes, rates and rules vary by lender, product and country, so confirm figures with your provider or a qualified adviser before making decisions.
Frequently asked questions
What are progressive tax brackets?
They are income bands taxed at increasing rates. Only the income inside each band is taxed at that band's rate, not your entire income.
What is the difference between marginal and effective tax rate?
The marginal rate applies to your next unit of income. The effective rate is total tax divided by total income, and it is lower than the marginal rate in a progressive system.
Does this calculator use my country's tax rates?
No. You enter the brackets, rates, allowance and credits yourself, because they differ by country and change over time. The defaults are only examples.
Can a pay rise leave me with less money?
Not because of brackets alone. Only the additional income is taxed at the higher rate, so take-home pay still rises. Some benefit phase-outs can behave differently, but that is separate from the bracket structure.
Is a credit better than an allowance?
Per unit, a credit is worth its full value, while an allowance is worth the amount times your marginal rate. A credit of 500 saves 500, but an allowance of 500 at a 20% marginal rate saves 100.
Related calculators
References and sources
- OECD, Taxing Wages: describes how personal income tax and social contributions are structured across countries. Link
- Your national tax authority publishes current brackets, allowances and credits.