Federal Income Tax (FIT)

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What is Federal Income Tax (FIT)?

The federal income tax or FIT is the tax that is collected by the U.S. government through the Internal Revenue Service (IRS) based on earnings. This is for individuals, trusts, corporations, and other legal entities. All types of earnings are subject to federal income tax: wages, salaries, bonuses, business income, gambling income, and all other types of earnings.

What is the Federal Income Tax (FIT) for? 

Federal Income tax (FIT) makes up the largest source of funds and revenue for the government. The money that is collected is collectively used to fund numerous projects, programs, and other expenses of the country. Some examples are the following: 

What are the Federal Income Tax (FIT) brackets? 

The U.S. federal tax system is based on a progressive tax system or the taxpayer’s ability to pay. An individual’s tax rate will depend on how much they earn. Meaning, those who earn higher incomes are also taxed higher. On the other hand, lower tax rates are required for those who earn lower incomes. This is the primary purpose of having federal income tax brackets or simply tax brackets. 

Here are the federal income tax brackets for 2021: 

Tax RateTaxable Income Bracket                     (For single individuals)Taxable Income Bracket                  (For Married Couples Filing Jointly)
37%For incomes over $523,600For incomes over $628,300
35%For incomes over $209,425For incomes over $418,850 
32%For incomes over $164,925For incomes over $329,850
24%For incomes over $86,375For incomes over $172,750 
22%For incomes over $40,525For incomes over $81,050 
12%For incomes over $9,950For incomes over $19,900
10%For incomes of $9,950 or lessFor incomes of $19,900 or less

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