Frequently Asked Questions

Marginal Tax Rate: This is the tax rate that applies to your last dollar of income or to additional income you might earn. It's the tax bracket rate shown in tax tables. For example, if you're in the 22% tax bracket, your marginal rate is 22%.

Effective Tax Rate: This is the actual percentage of your income that you pay in taxes, calculated by dividing your total tax by your total taxable income. Because of the progressive tax system, your effective rate is typically lower than your marginal rate.

For example, a single person with $65,000 in taxable income might be in the 22% marginal tax bracket, but their effective tax rate might only be around 14% because the lower portions of their income are taxed at lower rates.

Tax brackets are ranges of income that are taxed at specific rates. The U.S. employs a progressive tax system, which means that different portions of your income are taxed at different rates.

For example, with 2025 tax brackets for a single filer:

• The first $11,000 of taxable income is taxed at 10%
• Income from $11,001 to $44,725 is taxed at 12%
• Income from $44,726 to $95,375 is taxed at 22%
• And so on through higher brackets

If you have $60,000 in taxable income, you don't pay 22% on all of it. You pay 10% on the first $11,000, 12% on the next $33,725, and 22% only on the remaining $15,275.

Tax Deductions: These reduce your taxable income before the tax rate is applied. For example, a $1,000 tax deduction would reduce your taxable income by $1,000. If you're in the 22% tax bracket, this would save you $220 in taxes ($1,000 × 22%).

Tax Credits: These reduce your tax liability dollar-for-dollar after your tax has been calculated. A $1,000 tax credit would reduce your tax bill by exactly $1,000, regardless of your tax bracket.

Tax credits are generally more valuable than tax deductions of the same amount because they directly reduce your tax liability, not just your taxable income.

Standard Deduction: This is a fixed dollar amount that reduces your taxable income. For 2025, the standard deduction is $13,850 for single filers, $27,700 for married filing jointly, and $20,800 for heads of household.

Itemized Deductions: These are specific expenses that you can deduct, such as mortgage interest, charitable donations, state and local taxes (up to $10,000), and medical expenses that exceed 7.5% of your adjusted gross income.

When to Itemize: You should itemize when your total itemized deductions exceed your standard deduction. For example, if you're a single filer with $15,000 in eligible itemized deductions, you'd save more by itemizing than by taking the $13,850 standard deduction.

Our tax calculator can compare both approaches and show you which one would be more beneficial for your situation.

Tax Genie provides highly accurate tax estimates based on the latest federal and state tax brackets, standard deduction amounts, and other tax parameters. Our data is automatically updated from IRS sources to ensure calculations reflect current tax laws.

However, please note that:

• The calculator is designed for educational and planning purposes
• It may not account for every special tax situation or uncommon deduction
• Results are estimates and should not replace professional tax advice

For complex tax situations, we recommend consulting with a tax professional who can provide personalized guidance.

Tax Genie supports tax calculations for multiple income types:

• Salary/Wage Income: W-2 income from employment
• Self-Employment Income: Income from freelance work, consulting, or operating a business as a sole proprietor
• Investment/Trading Income: Income from various investment activities, including:
  • Short-term capital gains (assets held ≤ 1 year)
  • Long-term capital gains (assets held > 1 year)
  • Qualified dividends
  • Ordinary dividends
  • Section 1256 contracts (futures trading)

You can enter any combination of these income sources, and the calculator will properly apply the appropriate tax rates and calculations for each type.

Tax Genie supports both standard deduction and itemized deductions. For itemized deductions, you can input:

• Retirement Contributions: 401(k), IRA, and other retirement account contributions
• Health Accounts: HSA (Health Savings Account) and FSA (Flexible Spending Account) contributions
• Home Office Deduction: For self-employed individuals who use part of their home for business
• Mortgage Interest: Interest paid on home mortgages
• Charitable Donations: Contributions to qualified charitable organizations
• Medical Expenses: Out-of-pocket medical expenses (deductible if they exceed 7.5% of AGI)
• State and Local Taxes: State income taxes, local taxes, and property taxes (subject to SALT cap)
• Other Deductions: Miscellaneous deductions that still qualify under current tax law

The calculator will automatically compare your total itemized deductions to your standard deduction amount and show you which option provides greater tax savings.

Self-employment tax is calculated as follows:

• Self-employment tax rate is 15.3%, consisting of:
  • 12.4% for Social Security (applicable to the first $168,600 of combined wages and self-employment income for 2025)
  • 2.9% for Medicare (applicable to all self-employment income, with no upper limit)
• The calculator applies these rates to 92.35% of your self-employment income (this adjustment accounts for the employer-equivalent portion of self-employment tax)
• An additional 0.9% Medicare tax is applied to self-employment income above $200,000 for single filers or $250,000 for married filing jointly

The calculator also accounts for the deduction of the employer-equivalent portion of self-employment tax (7.65% of self-employment income) when calculating your income tax.