Income Tax Calculator

It can be stressful to get a handle on your income tax situation. Congratulations on taking the first step!

Now that you’re here, let’s take some time to understand the taxes you owe, what steps are available to minimize your bill, and how to stay on top of your taxes going forward. 

How does this income tax calculator work? 

Just enter some basic information about yourself, and our income tax calculator will estimate how much tax you'll owe,  or — if you see a negative number — how big your refund might be. 

It’s perfect for the roughly 10 million Americans who deal with the uncertainty of having self-employment income and want to know how it will affect their taxes. If you do have a W-2 job — with or without a side gig — our calculator will even estimate your withholding. That way, you won’t have to dig up your tax forms to get a useful result.

Notable factors included in our calculations

This calculator only considers your W-2 and self-employment income. It doesn’t factor in income from other sources, like investments, rental income, or income from a retirement account. 

Note that the calculator:

• Assumes moderate state and federal withholding on your W-2 income
• Includes a projected Qualified Business Income Deduction on your self-employment earnings
• Doesn’t account for tax deductions or credits 

What taxes do you pay when you file your return?

A number of different taxes are calculated on your annual return, but for most Americans, only two are relevant: income tax and self-employment tax. The latter applies to any money you earn from freelancing, a side hustle, or a small business. 

Here’s what you need to know about both tax categories.

Income taxes

Federal income tax is the most common type of tax, and it applies to all “earned income" — any income you received in exchange for performing a job.

You may have heard the US tax system described as “progressive” or “graduated.” Here’s what that means.

How the progressive tax system works

‍The easiest way to understand the progressive tax system is to think of income in terms of buckets. The first bucket of income is taxed at 10%, the second at 12%, the third at 22%, and so on. 

For example, let’s say you had gross wages of $50,000 in 2022. The first $10,275 is taxed at 10%, the next $31,500 is taxed at 12%, and the remainder of your salary ($8,225) is taxed at 22%. So your total tax liability would be broken down like this:

These buckets are called “tax brackets.” The idea is to treat everyone equally while still requiring higher taxes from higher earners.

You may have heard the terms “marginal” and “effective” tax rates thrown around. Your marginal tax rate simply refers to the highest tax bracket your income is exposed to. So using the example above, where you made $50,000, your marginal tax rate would be 22%.

But as we’ve learned, the majority of your income isn’t taxed at 22%. So the effective tax rate is used to describe the average rate that you actually pay. Using the example above, your effective tax rate would be 14%. That’s the average of 10, 12, and 22: (10 + 12 + 22) / 3 = 14. 

The income tax brackets for 2023, by filing status

Now that you have the basics, there’s one other complicating factor: filing status.

The tax brackets are determined according to your filing status: single, married filing jointly (MFJ), married filing separately (MFS), and head of household (HoH). See the table below: 

Self-employment taxes

Self-employment taxes are a combination of Social Security and Medicare taxes (often referred to as FICA).

For W-2 employees, these are automatically calculated and withheld from their paychecks and reported on their W-2. Consequently, they rarely have to deal with these taxes when they file their annual 1040 — they’ve already been squared up during the year.

Self-employed folks, on the other hand, don’t have it so easy. They have to calculate and remit their Social Security and Medicare taxes when they file, to the tune of 15.3%. To learn more about why this rate is so high, check out our guide to self-employment taxes. 

How do you lower your tax bill? 

Step #1: Claim your business write-offs

If you have freelance income or a side hustle, business write-offs are the only way to directly lower your self-employment taxes. The simple definition of a write-off is any work-related cost that’s ordinary in your industry and necessary for completing the job.

Oftentimes, people hesitate to claim business write-offs because they picture conventional things like computers, software, and office supplies that might not apply to them. But what’s traditional in one industry might not be traditional in another.

A pet groomer, for instance, probably doesn’t need a postage scale, but they do need shears, pet shampoo, and treats. Similarly, a freelance photographer probably doesn’t need a fax machine, but they might need ring lights, props, and multiple camera lenses.  

Don’t miss out on write-offs because you’ve boxed yourself in. You know what you need to get the job done, so write off those costs! And if you need some inspiration, check out our freelance tax deductions tool that lists common write-offs for more than 25 different jobs, from real estate agents to bloggers.

Step #2: Don’t miss out on your income adjustments

Income adjustments happen before anything else is calculated on your return, and they allow you to reduce the income subject to tax. The most common income adjustments include: 

• Educator expenses (up to $250)
• Retirement contributions
• HSA contributions
• Self-employed health insurance
• Student loan interest
• Alimony after a divorce
• The deductible part of self-employment tax

Step #3: Take the highest deduction available

Every taxpayer has two options here: the standard deduction or the itemized deduction. Whichever option you claim, your deduction is included on top of your business write-offs.

Standard deduction‍

The goal of the standard deduction is to shield a base amount of income from taxation. It’s supposed to be routinely adjusted for the cost of living, but I’ll leave it to the reader to decide if the IRS is anywhere close to the mark.

The standard deduction is granted automatically based on your filing status: