Individual Income Tax Rate

All countries levy a tax on the income of individuals and business entities. The rate of tax will vary in different countries and in the same country the individual income tax rate will depend on a lot of different factors. Every year, people all over the world have to calculate their annual incomes and pay their taxes according to the slabs which are set by the governing authorities.

Individual Income Tax rate is applied to the total personal income of the particular individual. There will be various deductions based on age of the individual and the types of income. For example senior citizens, usually in most countries, have more tax deductions and have a lesser tax burden. Also children below the age of 15 getting an income from a trust and so on, are taxed much less.

Usually there is a set limit for individual income, below which there is no tax to be paid. For example in Australia, an individual who is earning up to $6000 need not pay any tax. Only the amount earned above $6000 will attract tax. This minimum limit will differ in each country and the amount earned above this limit will be called taxable income.

The individual income tax rate is based on brackets of taxable income. These rates can change and an individual is supposed to know the current rates from the tax department. For example in the United States for the tax year 2009 the first bracket of taxable income for a single individual is from 0 to $8350, which attracts income tax at 10%. The second bracket is from $8350 to $33950 and has a tax rate of 15%. As you can see the rate goes up with the increased income of each bracket. The last bracket is for $372,951 and above and will attract a tax of 35%.

Let us take an actual example to see what the actual individual income tax rate would be. Suppose a person has a taxable income of $32, 550 then his rate will be calculated under the first two brackets. For $8025 which is the first bracket, he will be charged a tax of $802.50 which is at the rate of 10%. The second bracket will be $32,550 minus $8025, and this sum is charged at 15%, which will be $3678.75. The total tax that the individual has to pay will be $802.50 + $3678.75 = 4481.25.