Income Tax Calculator
Estimate income tax liability, effective tax rate, and take-home pay from your gross income and the tax rates that apply to you. The calculator applies the rates you enter band by band, the way progressive tax systems work.
Income tax formula
Most income tax systems are progressive: income is split into bands (also called brackets or slabs), and each band is taxed at its own rate. Only the income within a band is taxed at that band's rate.
tax = Σ (income in band × band rate)
Two rates matter when reading the result:
- Marginal rate — the rate charged on your last unit of income, i.e. the rate of the highest band you reach.
- Effective rate — total tax divided by total income:
effective rate = total tax / gross income. This is always lower than the marginal rate in a progressive system.
Worked example
Suppose a system taxes, for example, the first 10,000 at 10%, the next 30,000 at 20%, and anything above 40,000 at 30%. For a gross income of 50,000:
- First band:
10,000 × 0.10 = 1,000 - Second band:
30,000 × 0.20 = 6,000 - Third band:
10,000 × 0.30 = 3,000
Total tax is 1,000 + 6,000 + 3,000 = 10,000. The marginal rate is 30%, but the effective rate is 10,000 / 50,000 = 20%, and take-home income is 40,000. Moving into a higher band never reduces take-home pay: only the income above the threshold is taxed at the higher rate.
When to use this calculator
- Estimating take-home pay when evaluating a job offer or a raise, so you compare net rather than gross figures.
- Planning quarterly or annual tax payments if you are self-employed and need to set money aside through the year.
- Weighing extra income, such as overtime, freelance work, or a bonus, by checking the marginal rate that will apply to it.
- Assessing deductions and allowances, by rerunning the calculation with a lower taxable income to see the tax saved.
Tips for interpreting the result
- Enter the current official bands and rates for your country and tax year; they change regularly and often differ by filing status.
- Deductions and allowances reduce taxable income before the bands are applied, so apply them first.
- Tax credits differ from deductions: a credit reduces the tax itself, while a deduction reduces the income being taxed.
- Payroll withholding is an estimate of this calculation spread across pay periods; a refund or balance due settles the difference.
- Social security or other payroll contributions are usually calculated separately from income tax and reduce take-home pay further.
Related calculators
The budget calculator helps allocate your after-tax income, and the monthly payment calculator shows what loan repayments fit within it. For investment income and long-term planning, see the dividend calculator, the SIP calculator, and the coast FIRE calculator.
This calculator illustrates how banded tax works using the rates you supply; it is not tax advice. Confirm current official rates, allowances, and rules with your tax authority or a qualified tax professional before making decisions.