Personal income

How is US federal personal income tax structured?

The federal individual income tax under IRC §1 is a graduated, marginal-rate system with seven brackets [SC1]. For tax year 2025 (returns filed in 2026), Rev. Proc. 2024-40 sets the bracket thresholds. Single filers pay 10 percent up to USD 11,925, 12 percent through USD 48,475, 22 percent through USD 103,350, 24 percent through USD 197,300, 32 percent through USD 250,525, 35 percent through USD 626,350, and 37 percent above. Married-filing-jointly brackets are roughly double the single thresholds. Head-of-household sits between. Married-filing-separately mirrors single thresholds for most brackets but caps lower at the top.

The Internal Revenue Service administers the federal income tax through Form 1040 (Individual Income Tax Return) and its companion schedules. Federal tax year for individuals is the calendar year. Standard filing deadline is April 15 of the following year [SC1]. Where April 15 falls on a weekend or DC holiday, the deadline shifts to the next business day. A six-month automatic extension to file (not to pay) is available via Form 4868. Quarterly estimated payments are due April 15, June 15, September 15, and January 15 for filers whose withholding will not cover the year-end liability.

State and local income tax applies in 41 of 50 states plus DC. Nine states have no state-level individual income tax: Alaska, Florida, Nevada, New Hampshire (after 2025 phase-out of the interest-and-dividends tax), South Dakota, Tennessee, Texas, Washington, Wyoming. State top rates range from approximately 2.5 percent (Arizona flat rate) to over 13 percent (California top bracket). Many cities and counties impose local income tax — most notably New York City, Philadelphia, Detroit, several Ohio cities, and Kentucky local taxes.

What is filing status and how is it chosen?

Filing status under IRC §1 and the §2 status rules determines the tax bracket schedule, standard deduction amount, and eligibility for various credits and deductions [SC2]. The five filing statuses:

• Single: Unmarried at year-end, not eligible for any other status.
• Married Filing Jointly (MFJ): Married at year-end, both spouses sign one return. Joint and several liability for the entire tax. Generally the most favorable status for couples with one earner or two earners with disparate income.
• Married Filing Separately (MFS): Married at year-end, each spouse files independently. Bracket thresholds typically half of MFJ. Used in narrow scenarios: when one spouse owes substantial back taxes (innocent spouse protection), when income-driven student-loan repayment depends on individual AGI, or when state tax interactions favor separation.
• Head of Household (HOH): Unmarried at year-end AND providing more than half the cost of maintaining a home that was the principal residence for more than half the year of a qualifying child or qualifying relative. The HOH brackets are more favorable than single and apply to a significant cohort of single parents.
• Qualifying Surviving Spouse: For the two tax years following the spouse's death if the filer maintains a household with a dependent child. Uses MFJ brackets.

Filing status is determined as of December 31 of the tax year. A taxpayer married on December 31 is married for the whole year for filing purposes; same for divorce decreed on or before December 31 (treated as unmarried). Common-law marriages recognized by the filer's state are treated as marriages for federal tax. Same-sex marriages have been treated as marriages for federal tax since United States v. Windsor (2013).

Standard deduction versus itemized deductions

The standard deduction under IRC §63(c) is the default; filers itemize on Schedule A only when itemized deductions exceed the standard deduction [SC3]. For tax year 2025, Rev. Proc. 2024-40 sets the standard deduction at USD 15,000 (single, MFS), USD 22,500 (head of household), and USD 30,000 (MFJ, qualifying surviving spouse). Additional standard deduction for age 65+ or blindness adds USD 1,600 per condition per spouse (USD 2,000 for unmarried filers).

Itemized deductions on Schedule A include:

• State and local taxes (SALT) under IRC §164: State and local income tax (or sales tax — pick one), real property tax, and personal property tax. Capped at USD 10,000 aggregate (USD 5,000 MFS) by TCJA. The SALT cap was scheduled to sunset at end of 2025; OBBBA 2025 made the cap permanent.
• Mortgage interest under IRC §163(h): Interest on home mortgage debt up to USD 750,000 of acquisition indebtedness (USD 1,000,000 grandfathered for pre-Dec 15, 2017 loans). Combined limit across primary and one second home.
• Charitable contributions under IRC §170: Cash contributions to qualifying public charities deductible up to 60 percent of AGI; appreciated property to public charities up to 30 percent of AGI; private foundation contributions at lower limits. Substantiation requirements: written acknowledgment for contributions of USD 250 or more.
• Medical expenses under IRC §213: Above 7.5 percent of AGI floor. Includes premiums, out-of-pocket medical and dental expenses, prescription drugs, qualifying long-term care.
• Casualty and theft losses: Limited to federally-declared disasters after TCJA.

After TCJA approximately doubled the standard deduction in 2018, the share of filers itemizing dropped from approximately 30 percent to under 12 percent. Itemizing now benefits primarily filers with substantial mortgage interest in HCOL markets, significant charitable contributions, and full SALT-cap usage.

What credits matter for personal income tax?

Federal personal income tax credits reduce tax liability dollar-for-dollar (more valuable than deductions, which only reduce taxable income). Key credits [SC4]:

• Earned Income Tax Credit (EITC) under IRC §32: Refundable credit for low-and-moderate-income working filers. For tax year 2025, max credit ranges from USD 649 (no qualifying children) to USD 8,046 (three or more qualifying children). Phase-out thresholds depend on filing status and family size.
• Child Tax Credit (CTC) under IRC §24: USD 2,000 per qualifying child under 17 for 2025, with USD 1,700 of that refundable as the Additional Child Tax Credit. Phase-out begins at USD 200,000 single / USD 400,000 MFJ.
• Credit for Other Dependents under IRC §24(h)(4): USD 500 non-refundable for qualifying dependents who do not qualify for the CTC (dependent parents, dependent children over 17, qualifying relatives).
• American Opportunity Tax Credit under IRC §25A: Up to USD 2,500 per eligible student for the first four years of post-secondary education. 40 percent refundable. Phase-out USD 80,000 single / USD 160,000 MFJ.
• Lifetime Learning Credit: Up to USD 2,000 per return (not per student) for tuition and qualified education expenses. Non-refundable. Phase-out same as AOTC.
• Premium Tax Credit under IRC §36B: For Affordable Care Act marketplace enrollees with household income between 100 and 400 percent of federal poverty level (the ARPA-extended ceiling beyond 400 percent for affordability cliff sunset rules vary by year).
• Saver's Credit under IRC §25B: Up to USD 1,000 (USD 2,000 MFJ) for low-and-moderate-income filers contributing to retirement accounts.
• Child and Dependent Care Credit under IRC §21: For care expenses for qualifying children under 13 or disabled dependents allowing the filer to work. 20-35 percent of up to USD 3,000 (one dependent) or USD 6,000 (two or more).
• Residential Clean Energy Credit under IRC §25D: 30 percent of qualifying solar, geothermal, wind, fuel cell, and battery storage installed at the filer's residence. No annual or lifetime cap.
• Energy Efficient Home Improvement Credit under IRC §25C: 30 percent of cost for qualifying improvements (heat pumps, windows, doors, insulation, audits) up to annual caps that vary by improvement type.

How does the Net Investment Income Tax apply?

The Net Investment Income Tax (NIIT) under IRC §1411 adds 3.8 percent on the lesser of net investment income or modified adjusted gross income (MAGI) above USD 200,000 (single, head of household), USD 250,000 (MFJ), or USD 125,000 (MFS) [SC5]. The thresholds are NOT inflation-indexed and have been fixed since NIIT took effect in 2013.

Net investment income includes interest, dividends, capital gains, rental and royalty income, non-qualified annuities, and income from businesses involved in trading financial instruments or businesses that are passive activities. It does NOT include distributions from qualified retirement accounts, wages, self-employment income, Social Security benefits, tax-exempt interest, or active trade or business income. Form 8960 computes NIIT and routes it to Schedule 2 of Form 1040.

The Additional Medicare Tax under IRC §3101(b)(2) of 0.9 percent applies to wages, compensation, and self-employment income above USD 200,000 (single), USD 250,000 (MFJ), or USD 125,000 (MFS). Computed on Form 8959. Employers withhold the additional 0.9 percent from wages exceeding USD 200,000 regardless of filing status.

How do filers handle amended returns and IRS notices?

Form 1040-X (Amended US Individual Income Tax Return) is filed to correct errors or claim refunds on a previously filed return. Generally must be filed within 3 years of the original return's due date (including extensions) or 2 years from when the tax was paid, whichever is later. Common amendment scenarios: missed deduction or credit, missed income, change in filing status (within allowed windows), correction of social security number or filing status, retroactive treaty or election change.

IRS notices (CP series) cover routine communications. The most common include CP14 (initial balance-due notice), CP501 / CP503 / CP504 (escalating reminders), CP90 (intent to levy), and CP504B (intent to levy state refund). Responses are typically due within 30 days. The Office of the Taxpayer Advocate (TAS) provides assistance for filers facing IRS hardship not resolvable through normal channels.

For the federal tax stack interaction with capital gains and investment income, see the Capital gains tax and Dividend and investment tax crossovers. For cross-border filers see the Expat tax residency crossover. The US federal tax overview covers the full stack. To find a credentialed practitioner for individual returns, browse the US tax-pros directory.