1 1 - 2Shares
I was watching the news the other day and heard a commotion about the new 2018 tax brackets. Something about they were late, companies are having a tough adjusting pay, and that employees should double check their pay checks. Oh, and the government will at some point share an easy estimator tool. I sighed and thought, “come on guys, how hard can it be!”
Let me start by saying that I am not a CPA and cannot be held liable for any inaccuracies. Please do not contact me to tell me your employer don’t agree with my estimates nor yell at me come April 2019 to say my numbers were way off. We all know the federal tax bracket system is archaic and complex and that is just the income tax; don’t get me started on the complexities of filing your taxes. Honestly, I try to change my withholding every year to be even come April, but, alas, I never have be exact (though pretty close). Furthermore, I just threw this together in an hour for fun.
I started with Notice 1036 that the IRS posted on 1/11/2018 which outlines the income tax brackets, social security, and medicare tax. I only briefly glanced at it as I was pretty familiar with the basic mechanic: federal income is based off of progressive percent brackets in that your income in lower bracket gets taxed lower and surplus is taxed in higher and higher brackets. Hence if you make $1 more to put you in a higher bracket, say the 37% bracket, don’t worry, all of your income is not taxed in that bracket (as many often think) only that extra dollar will loose 37 cents (oddly your enough your effective tax is around 26%). To add to the complexities of the brackets, there are different ones depending on single and married filing.
The mechanics of social security and medicare are much easier in that they are flat percentages of your income with a couple caveats. Social security is 6.2% up $128,400; any income after that is not taxed (yes, it a sore subject for many). Medicare is somewhat the opposite. Its tax is 1.45% up $200k and income over that is increased an additional 0.9% (couldn’t they just say 1%).
Taking all of this, I threw it into a Google Sheet and now give you to play with (note, I also put allowances in there but actually never use them and may or may not have implemented them correctly). You can also play with it below but as with Google sheets, all users are editing simultaneously and are live; I suggest to make a personal copy for yourself.
Of course with all tools, I wanted to play too, and I do like some eye candy so I decided to make a few graphs. Since I wanted to show many income points it is best to use a log scale as shown below.
However, log scales can be a bit confusing and not as intuitive so I also am including one with normal scales (but truncated some of the higher incomes)
For the annotations I used various sources: Healthcare.gov for the Federal Poverty Levels, Wikipedia for the median, and Investopedia for the 1, 5, 10% (I was lazy).