Federal Income Tax Rates for Retirement Planning

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Most income you earn is taxed, but not always at the same rate. Understanding how federal income tax rates work is critical to estimating your tax burden today and planning for retirement tomorrow. This guide to taxes can help you understand tax brackets for retirees so you can craft a successful retirement strategy.

Basics of Federal Income Tax Brackets

The U.S. uses a progressive tax system that consists of several tax brackets. Each of the brackets is associated with a span of income that's taxed at a certain percentage. The brackets apply only to the amount of income that remains after you subtract your standard deduction or your itemized deductions and any exemptions you're entitled to claim. That is your taxable income.


High-income individuals pay more in taxes as a percentage of their taxable incomes than low-income earners.

Your taxable income would be $72,000 if you're a single filer with an income of $84,950 and if you were to take the standard deduction of $12,950 for tax year 2022. The full $72,000 wouldn't be taxed at the same rate, however. Different tax rates are applied to different portions of that amount, according to seven different tax brackets that are based on filing status.

The tax brackets range from 10% to 37%. The 37% tax bracket might seem high, but it only applies to the highest earners.

How Federal Taxes Work for Single Filers

Your tax would be calculated like this if your taxable income is $72,000 and you're single:

  • The first $10,275 would be taxed at 10%, so you'd pay $1,027.50 on that amount
  • The next $31,500 would be taxed at 12%, so you'd pay $3,779.88 on that portion
  • The last $30,224 would be taxed at 22%, so you'd pay $6,649.28
  • You'd owe a total of $11,456.66 in federal taxes

Your marginal rate, which is your highest tax bracket, would be 22%, but only $30,224 of your income would be taxed at that rate. Your effective tax rate, which is your taxes paid divided by your taxable income, would work out to about 16% ($11,456.66 / $72,000).

How Federal Taxes Work for Couples

This is how your federal income tax would be calculated if you were filing jointly with a spouse and had the same taxable income of $72,000:

  • The first $20,550 would be taxed at 10%, so you'd pay $2,055 on that amount
  • That would leave $51,450 of taxable income, which would be taxed at 12%, so you'd pay $6,174 on that portion
  • You'd owe a total of $8,229 in taxes

You would be at the 12% marginal rate in this situation, but only $51,450 of your income would be taxed at that rate. Your effective tax rate would be about 11.4%.

Capital Gains Tax Rates

Selling an investment held within a non-retirement account can trigger a capital gains tax if the difference between the sale price and the purchase price of the investment is positive—that is, if you realized a profit. Capital gains are treated as taxable income in the year you incur them, and they're sometimes subject to their own tax rates.

Short-term capital gains on investments held for a year or less are taxed at ordinary income tax rates along with your other income. Long-term capital gains on investments you've held for more than one year are taxed at lower rates. You'll pay either a 0%, 15%, or 20% tax rate on long-term capital gains, depending on your income and filing status.

  • 0%: Up to $41,675 if you’re single, up to $83,350 if you’re married and filing jointly, or up to $55,800 if you qualify to file as a head of household
  • 15%: From $41,676 to $459,750 if you’re single, $41,676 to $258,600 if you're married filing separately, $83,351 to $517,200 if you’re married and filing jointly, or from $55,801 to $488,500 if you qualify as head of household 
  • 20%: Over these upper amounts for each filing status

A married couple with $50,000 in taxable income could therefore realize $30,000 in long-term capital gains and pay no tax on the gain for tax year 2022. Realizing a capital gain in years where you pay no tax on it is one of a few ways to earn tax-free investment income.


Capital gains tax rates are also adjusted annually for inflation, so these thresholds are higher for tax year 2023. The 15% rate applies to singles with incomes from $44,625 to $492,300, and to married joint filers with incomes from $89,250 to $553,850.

Taxes for High Earners

Some special tax rules apply only to high-income taxpayers.

Alternative Minimum Tax

The Alternative Minimum Tax (AMT) recaptures tax from high earners. It's imposed on those who earn sufficient income to take advantage of multiple tax breaks, whittling their taxable incomes down to a point where they pay very little in taxes. The AMT ensures that they still pay a minimum amount in tax.

You can calculate your AMT by reducing your taxable income by certain exclusions and the AMT exemption amount, then multiplying the result by AMT tax rates and subtracting foreign tax credits. You'd have to pay the AMT calculated tax if it's higher. The AMT exemption is $75,900 for the 2022 tax year. It's $118,100 for married couples for tax year 2022, the return you file in 2023.

Additional Medicare Tax

The Additional Medicare Tax also applies to high incomes. This tax works like FICA taxes (Medicare and Social Security). It's a flat 0.9% on earned income in excess of $200,000 for singles, $250,000 for married couples who file joint returns, and $125,000 for married taxpayers who file separate returns.

Net Investment Income Tax

The Net Investment Income Tax (NIIT) applies to investment incomes rather than wages or earned income. It's a flat 3.8% tax that comes due on the investment portion of your income if your AGI is in excess of $200,000 and you're single, or $250,000 for married couples who file joint returns. Married-filing-separately taxpayers are limited to a threshold of $125,000.

Using Tax Rates Before Retirement

Contributing pre-tax dollars to a tax-deferred retirement account in the years before you retire, such as a traditional IRA or a 401(k), minimizes your taxable income in those years. It would reduce your taxable income in the year you make the contribution. This is particularly beneficial if you're in a high tax bracket now and expect to be in a lower bracket when you start taking withdrawals in retirement.

The benefit of contributing to a traditional IRA begins to diminish if you expect a taxable income of only $25,000 for the year, because the tax-deductible contribution of $2,000 would only save you tax at the 12% rate. This would reduce your tax bill by just $240. Contributing with post-tax dollars to a ​Roth IRA might make more sense in this scenario.​


It might not make sense to continue making tax-deductible contributions if you find yourself earning less. 

Consider using your expected tax bracket in retirement to determine which type of account to fund each year if your income varies, such as if you work on a commission basis. This decision should also be revisited if you're easing into retirement. Determine whether you have investment income that could be repositioned to reduce your overall annual tax bill.

Using Tax Rates During Retirement

Tax planning gets more complicated when the time comes to start withdrawing your retirement income. Each withdrawal you take from a tax-deferred retirement account counts as taxable income in the year you make the withdrawal. It's taxed at ordinary income tax rates.


If you turned 72 in 2022, you are required to take withdrawals. If you're turning 72 in 2023, you can wait to take the required minimum distributions because the age requirement in 2023 is now 73. That age goes up to 75 in 2033.

All of your combined sources of income will additionally affect how much of your Social Security income is taxable when you begin collecting benefits. Getting help from a financial planner before you start withdrawals can save you money in the long run.

Frequently Asked Questions (FAQs)

How do I estimate what my federal tax bracket will be in my retirement years?

Your tax bracket in retirement will depend on all of your sources of income, such as 401(k) plans, IRAs, and Social Security benefits. If you're following a rule of thumb like the 4% rule for retirement income, then you can estimate your tax liability by finding the bracket that lines up with 4% of your savings. Revisit these estimates throughout the year when you're in retirement so you won't be surprised by your tax bill.

What is the average tax rate for Americans in retirement?

The median annual income for Americans age 65 and older was $46,360 in 2020, according to the U.S. Census Bureau. That would land the bulk of married retirees in the 12% tax bracket. It would put single filers in the 22% bracket.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. IRS. "IRS Provides Tax Inflation Adjustments for Tax Year 2022."

  2. Tax Foundation. "2021 Tax Brackets."

  3. IRS. "Revenue Procedure 2022-38."

  4. IRS. “26 CFR 601.602: Tax Forms and Instructions.” Page 12.

  5. IRS. "Topic No. 560 Additional Medicare Tax."

  6. IRS. "Questions and Answers on the Net Investment Income Tax."

  7. Fidelity. "SECURE 2.0: Rethinking Retirement Savings."

  8. Census Bureau. "Age of Householder-Households, by Total Money Income, Type of Household, Race and Hispanic Origin of Householder," Download "2020, Total, All Races."

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