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Tax Calculator — Income Tax & Withholding Calculator

Estimate federal income tax based on current tax brackets

Tax Calculator: Federal Income Tax Estimator

Table of Contents

2026 Global Tax Landscape

The global taxation environment has evolved significantly in 2026, with inflation adjustments pushing income thresholds upward across major economies whilst base rates remain largely stable.

United States: OBBBA Changes

The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, permanently extended most Tax Cuts and Jobs Act provisions that had been scheduled to expire at the end of 2025. Federal tax parameters for 2026 have been adjusted upward by approximately 2.7 per cent for inflation.

2026 US Federal Tax Brackets (Single Filers):

| Taxable Income | Marginal Rate | |----------------|---------------| | Up to $12,400 | 10% | | $12,401 – $48,750 | 12% | | $48,751 – $103,700 | 22% | | $103,701 – $197,400 | 24% | | $197,401 – $250,800 | 32% | | $250,801 – $640,600 | 35% | | Above $640,600 | 37% |

2026 US Federal Tax Brackets (Married Filing Jointly):

| Taxable Income | Marginal Rate | |----------------|---------------| | Up to $24,800 | 10% | | $24,801 – $97,500 | 12% | | $97,501 – $207,400 | 22% | | $207,401 – $394,800 | 24% | | $394,801 – $501,600 | 32% | | $501,601 – $768,600 | 35% | | Above $768,600 | 37% |

The 2026 standard deduction has increased to $16,100 for single filers and $32,200 for married couples filing jointly, representing increases of $350 and $700 respectively from 2025.

A notable addition for 2026 is the enhanced senior deduction: taxpayers aged 65 and older with adjusted gross income below $75,000 (single) or $150,000 (joint) may claim an additional $6,000 deduction for tax years 2025 through 2028.

United Kingdom: Frozen Thresholds

UK income tax thresholds remain frozen until April 2031, a policy that results in "fiscal drag" as wages increase whilst bands remain static. This effectively moves more taxpayers into higher brackets without any change in rates.

2026/27 UK Income Tax Bands (England, Wales, Northern Ireland):

| Taxable Income | Rate | |----------------|------| | Up to £12,570 | 0% (Personal Allowance) | | £12,571 – £50,270 | 20% (Basic) | | £50,271 – £125,140 | 40% (Higher) | | Above £125,140 | 45% (Additional) |

The Personal Allowance taper continues to penalise high earners: for every £2 of adjusted net income above £100,000, the allowance reduces by £1, eliminating it entirely at £125,140. This creates an effective marginal rate of 60 per cent for income between £100,000 and £125,140.

From April 2026, dividend tax rates increase to 10.75 per cent (basic rate) and 35.75 per cent (higher rate), up from 8.75 per cent and 33.75 per cent respectively.

Australia: Stage 3 Cuts Stabilise

Australia's Stage 3 tax cuts, fully implemented from 1 July 2024, have simplified the bracket structure. From 1 July 2026, the second bracket rate reduces from 16 per cent to 15 per cent.

2025-26 Australian Tax Brackets (Residents):

| Taxable Income | Rate | |----------------|------| | Up to $18,200 | 0% (Tax-free threshold) | | $18,201 – $45,000 | 16% | | $45,001 – $135,000 | 30% | | $135,001 – $190,000 | 37% | | Above $190,000 | 45% |

The Medicare Levy of 2 per cent applies to most residents, with low-income thresholds exempting singles earning up to $26,000 and families up to $41,089 plus $3,760 per dependent child.

Canada: Inflation-Indexed Brackets

Canada's 2026 federal brackets have been indexed by 2 per cent, with the lowest rate reduced from 15 per cent to 14 per cent (effective from 1 July 2025).

2026 Canadian Federal Tax Brackets:

| Taxable Income | Rate | |----------------|------| | Up to $58,523 | 14% | | $58,524 – $117,045 | 20.5% | | $117,046 – $181,440 | 26% | | $181,441 – $258,482 | 29% | | Above $258,482 | 33% |

The Basic Personal Amount has increased to $16,452 for 2026, providing a tax credit worth up to $2,303 (14 per cent of $16,452) for most taxpayers.

Why Tax Brackets Matter for Your Financial Planning

Understanding marginal versus effective tax rates represents one of the most frequently misunderstood aspects of personal finance. A 2024 study by the National Bureau of Economic Research found that 43 per cent of Americans incorrectly believed that earning additional income could result in lower take-home pay due to bracket progression.

The Marginal Rate Misconception

Progressive taxation means only income within each bracket is taxed at that bracket's rate. Earning $1 more never results in less money after tax. Yet this misconception influences behaviour: workers decline overtime, individuals avoid side income, and some reject promotions based on flawed calculations.

Example: US Median Household Income

The US Census Bureau reported median household income at $83,730 for 2024. For a single filer with this income and no adjustments:

  • Taxable income after standard deduction: $83,730 - $16,100 = $67,630
  • Tax calculation:
    • 10% on first $12,400 = $1,240
    • 12% on $12,401 – $48,750 = $4,362
    • 22% on $48,751 – $67,630 = $4,154
    • Total federal tax: $9,756
    • Effective rate: 11.7%
    • Marginal rate: 22%

This taxpayer's effective rate (11.7 per cent) falls considerably below their marginal rate (22 per cent), demonstrating why understanding the distinction matters for financial decisions.

How to Use This Calculator

Step 1: Select Filing Status Choose from Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Widow(er). This determines your bracket thresholds and standard deduction amount.

Step 2: Enter Gross Income Input total income from all sources: wages, self-employment, investments, rental income, retirement distributions, and any other taxable earnings.

Step 3: Enter Adjustments to Income These "above-the-line" deductions reduce Adjusted Gross Income (AGI) regardless of whether you itemise. Common adjustments include:

  • Traditional 401(k) and IRA contributions
  • HSA contributions
  • Student loan interest (up to $2,500)
  • Self-employment tax deduction (50% of SE tax)
  • Alimony payments (for divorces finalised before 2019)

Step 4: Select Deduction Type Choose standard deduction or itemised deductions (whichever is larger). Itemised deductions include:

  • Mortgage interest
  • State and local taxes (capped at $10,000)
  • Charitable contributions
  • Medical expenses exceeding 7.5% of AGI

Step 5: Enter Tax Credits Credits reduce tax liability directly. Common credits include:

  • Child Tax Credit ($2,000 per qualifying child)
  • Earned Income Tax Credit
  • American Opportunity Credit (education)
  • Lifetime Learning Credit

Step 6: Enter Withholding Input total federal income tax withheld from paychecks, shown on Form W-2 or pay stubs.

Understanding Progressive Taxation

The calculation pathway for US federal income tax follows a consistent structure:

Gross Income
− Adjustments to Income
= Adjusted Gross Income (AGI)
− Deductions (Standard or Itemised)
= Taxable Income
× Progressive Bracket Rates
= Tax Before Credits
− Tax Credits
= Total Tax Liability
− Withholding/Estimated Payments
= Refund or Amount Due

Why Progressive Systems Exist

Progressive taxation implements the principle of ability to pay: those with higher incomes contribute a larger proportion. The alternative, a flat tax, would require lower earners to sacrifice a greater share of income needed for necessities.

The UK, Australia, Canada, and most OECD nations employ progressive systems, though bracket structures and rates vary significantly. The United States has maintained seven brackets since the Tax Cuts and Jobs Act of 2017, down from the fifteen brackets that existed during parts of the 1980s.

International Tax Bracket Comparison

Comparing tax burdens across countries requires examining not just income tax but also social insurance contributions, consumption taxes, and the value of public services received.

Equivalent Income: $100,000 Single Filer

| Country | Taxable Income | Income Tax | Social Insurance | Effective Rate | |---------|---------------|------------|------------------|----------------| | US | $83,900 (after std ded) | $13,193 | $7,650 (employee FICA) | ~20.8% | | UK | £79,370 (equiv.) | £21,232 | £5,514 (NI) | ~33.7% | | Australia | AUD 153,500 (equiv.) | AUD 37,217 | AUD 3,070 (Medicare) | ~26.2% | | Canada | CAD 137,900 (equiv.) | CAD 23,847 (fed+prov avg) | CAD 4,390 (CPP/EI) | ~20.5% |

These comparisons illustrate why single-metric tax burden comparisons prove misleading. UK taxpayers receive NHS healthcare without additional premiums, whilst US taxpayers must add health insurance costs to their calculation. Australian rates include Medicare Levy, funding universal healthcare access.

The UK £100k Trap

UK taxpayers face a peculiar cliff at £100,000 adjusted net income. The Personal Allowance of £12,570 reduces by £1 for every £2 earned above £100,000, creating a 60 per cent effective marginal rate between £100,000 and £125,140.

Calculation Example:

A UK taxpayer earning £110,000:

  • Personal Allowance reduced by: (£110,000 - £100,000) ÷ 2 = £5,000
  • Remaining Personal Allowance: £12,570 - £5,000 = £7,570
  • Additional taxable income versus someone earning £100,000: £10,000 + £5,000 = £15,000
  • Additional tax: £15,000 × 40% = £6,000
  • Effective rate on that £10,000: 60%

This incentivises pension contributions for those approaching the £100,000 threshold, as salary sacrifice reduces adjusted net income and preserves the Personal Allowance.

Worked Calculations with Current Data

Scenario 1: US Tech Worker with Stock Options

Profile: Single filer in California, $180,000 salary, $15,000 401(k) contribution, $20,000 in exercised ISO stock options, $3,000 HSA contribution

Federal Calculation:

  • Gross Income: $180,000 + $20,000 = $200,000
  • Adjustments: $15,000 (401k) + $3,000 (HSA) = $18,000
  • AGI: $182,000
  • Standard Deduction: $16,100
  • Taxable Income: $165,900

Tax calculation (2026 brackets):

  • 10% on $12,400 = $1,240
  • 12% on $36,350 = $4,362
  • 22% on $54,950 = $12,089
  • 24% on $62,200 = $14,928
  • Total Federal Tax: $32,619
  • Effective Rate: 16.3%

Note: ISO exercises may trigger Alternative Minimum Tax (AMT). The 2026 AMT exemption is $90,100 for single filers, with a 26% rate on AMT income up to $232,600.

Scenario 2: UK Higher Rate Taxpayer

Profile: Employee earning £65,000, £4,000 pension contribution via salary sacrifice

Calculation:

  • Gross salary before sacrifice: £65,000
  • Salary after sacrifice: £61,000
  • Personal Allowance: £12,570
  • Taxable Income: £48,430

Tax calculation:

  • 20% on £37,700 (£12,571 - £50,270) = £7,540
  • 0% on higher rate portion (income below £50,270)
  • Income Tax: £7,540
  • Effective Rate: 12.4%

Without salary sacrifice (£65,000 gross):

  • Taxable: £52,430
  • Basic rate: £37,699 × 20% = £7,540
  • Higher rate: £2,160 × 40% = £864
  • Income Tax: £8,404
  • Pension contribution relief (at source): £0 additional benefit

The salary sacrifice saves £864 in income tax plus National Insurance contributions, demonstrating why higher-rate taxpayers benefit substantially from this arrangement.

Scenario 3: Australian Two-Income Household

Profile: Couple with incomes of $95,000 and $55,000, no dependents

Partner 1 ($95,000):

  • Tax-free threshold: $0
  • 16% on $26,800 = $4,288
  • 30% on $50,000 = $15,000
  • Income Tax: $19,288
  • Medicare Levy: $1,900
  • Total: $21,188 (22.3% effective)

Partner 2 ($55,000):

  • 16% on $26,800 = $4,288
  • 30% on $10,000 = $3,000
  • Income Tax: $7,288
  • Medicare Levy: $1,100
  • Total: $8,388 (15.3% effective)

Combined household:

  • Total income: $150,000
  • Total tax: $29,576
  • Combined effective rate: 19.7%

Self-Employment and Payroll Taxes

Self-employed individuals face additional tax obligations beyond income tax. In the United States, self-employment tax covers both employer and employee portions of Social Security and Medicare.

2026 US Self-Employment Tax

| Component | Rate | Wage Base | |-----------|------|-----------| | Social Security | 12.4% | $184,500 | | Medicare | 2.9% | No limit | | Additional Medicare | 0.9% | Above $200,000 (single) | | Total | 15.3% | — |

The Social Security wage base for 2026 is $184,500, meaning the maximum Social Security portion is $22,878 (12.4% × $184,500).

Calculation Example: Freelancer Earning $100,000

  • Net self-employment income: $100,000
  • SE tax base (92.35% of net): $92,350
  • Social Security: $92,350 × 12.4% = $11,451
  • Medicare: $92,350 × 2.9% = $2,678
  • Total SE Tax: $14,129
  • Deductible portion (50%): $7,065

This deduction reduces AGI, providing income tax savings at the taxpayer's marginal rate. For someone in the 24% bracket, the $7,065 deduction saves approximately $1,696 in federal income tax.

UK Class 2 and Class 4 National Insurance

Self-employed UK taxpayers pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% above £50,270. Class 2 contributions (£3.45 per week) are payable if profits exceed £12,570.

Quarterly Estimated Payments

When withholding does not cover expected tax liability, quarterly estimated payments become necessary to avoid penalties. In the United States, payments are due:

  • Q1: 15 April
  • Q2: 15 June
  • Q3: 15 September
  • Q4: 15 January (following year)

The safe harbour rule protects taxpayers from penalties if payments equal 100% of prior year tax liability (110% for AGI above $150,000) or 90% of current year liability.

Limitations and Professional Considerations

This calculator provides estimates suitable for planning purposes. Several scenarios require professional tax advice:

Complex Situations:

  • Alternative Minimum Tax (AMT) calculations
  • Foreign income and tax credits
  • Rental property depreciation
  • Stock option exercises (ISO/NSO)
  • Trust and estate distributions
  • Multi-state income allocation
  • Cryptocurrency transactions

State and Local Taxes: The calculator addresses federal income tax only. State income tax rates vary from 0% (Texas, Florida, Nevada, Wyoming, Washington, South Dakota, Alaska) to over 13% (California top rate). Local income taxes apply in some jurisdictions (New York City, Pennsylvania localities).

Year-Over-Year Changes: Tax law changes frequently. The OBBBA made permanent many TCJA provisions, but other aspects remain subject to legislative revision. Always verify current rates and thresholds before making significant financial decisions.

Sources

FAQs

What is the difference between marginal and effective tax rates?

The marginal rate applies to the last pound or dollar of income earned, determining the tax impact of additional earnings. The effective rate is total tax divided by total income, representing the average rate across all earnings. A US single filer earning $100,000 in 2026 has a marginal rate of 22% but an effective federal rate of approximately 14%.

Are UK income tax thresholds still frozen?

The Personal Allowance (£12,570) and higher rate threshold (£50,270) remain frozen until April 2031, as confirmed in the 2025 Budget. This policy increases real tax burdens as wages rise, a phenomenon termed "fiscal drag" that is estimated to bring an additional 4 million taxpayers into the higher rate band by 2028.

How do 401(k) contributions affect my tax bill?

Traditional 401(k) contributions reduce AGI, lowering taxable income in the year of contribution. For someone in the 22% marginal bracket, each $1,000 contributed saves $220 in federal income tax. The 2026 contribution limit is $24,000, with an additional $7,500 catch-up contribution permitted for those aged 50 and older.

What is the SALT deduction cap?

State and local tax (SALT) deductions are limited to $10,000 ($5,000 for married filing separately). This cap, introduced by the TCJA and made permanent by OBBBA, particularly affects taxpayers in high-tax states such as California, New York, and New Jersey, where combined state income and property taxes frequently exceed this threshold.

Do I need to make quarterly estimated payments?

Quarterly payments are required if withholding does not cover at least 90% of current year tax liability (or 100% of prior year liability, 110% if AGI exceeds $150,000). Self-employed individuals, those with significant investment income, and high earners with multiple income sources most commonly require these payments.

How does the UK £100k tax trap work?

For income between £100,000 and £125,140, the Personal Allowance reduces by £1 for every £2 earned. Combined with the 40% higher rate, this creates an effective 60% marginal rate. A taxpayer earning £125,140 loses the entire £12,570 Personal Allowance, paying approximately £5,028 more in tax than if the allowance were preserved.

What is Australia's Medicare Levy Surcharge?

Singles earning above $93,000 (families above $186,000) without private hospital insurance pay an additional surcharge of 1% to 1.5% on taxable income. Purchasing hospital cover typically costs less than the surcharge for most taxpayers above these thresholds.

Can this calculator handle state income taxes?

This calculator computes federal income tax only. State income tax structures vary considerably: some states use flat rates (Colorado 4.4%, Illinois 4.95%), others employ progressive brackets (California, New York), and several impose no income tax at all (Florida, Texas, Nevada).

What changed with the One Big Beautiful Bill Act?

OBBBA, enacted July 2025, permanently extended TCJA individual tax provisions including the seven-bracket structure, increased standard deductions, and the $10,000 SALT cap. It also introduced a temporary $6,000 additional deduction for seniors aged 65+ with income below specified thresholds (2025-2028).

How do I calculate self-employment tax?

Self-employment tax is 15.3% on 92.35% of net self-employment income, up to the Social Security wage base ($184,500 for 2026). Half of SE tax is deductible from gross income. A freelancer with $100,000 net earnings pays approximately $14,129 in SE tax but may deduct $7,065 from AGI.