Fillable Stylized Marginal And Average Income Tax Rates (Department of the Treasury - OCIO)

Fill Online, Printable, Fillable, Blank Stylized Marginal And Average Income Tax Rates (Department of the Treasury - OCIO) Form

Use Fill to complete blank online DEPARTMENT OF THE TREASURY - OCIO (DC) pdf forms for free. Once completed you can sign your fillable form or send for signing. All forms are printable and downloadable.

Stylized Marginal And Average Income Tax Rates (Department of the Treasury - OCIO)

On average this form takes 11 minutes to complete

The Stylized Marginal And Average Income Tax Rates (Department of the Treasury - OCIO) form is 16 pages long and contains:

  • 0 signatures
  • 0 check-boxes
  • 45 other fields

Country of origin: US
File type: PDF

U.S.A. forms for Department of the Treasury - OCIO

BROWSE DEPARTMENT OF THE TREASURY - OCIO (DC) FORMS

Related forms
Fill has a huge library of thousands of forms all set up to be filled in easily and signed.
Fill in your chosen form
Sign the form using our drawing tool
Send to someone else to fill in and sign.
find another form
 
Stylized Marginal and Average Income Tax Rates
and Tax Support
for Families with Children and Students
as Family Income Increases
2019 Law
Office of
Tax Analysis
May 10, 2019
U.S. Department of the Treasury
Office of Tax Analysis
May 2019
The amount of income tax owed and tax benefits received at any level of income is determined
by the interaction of the taxpayer’s income and filing status with the other characteristics of the
taxpayer’s family. These figures present the stylized marginal and average tax rates faced by
five typical family types with different incomes. For families with dependents, the amount of tax
support provided to the family due to the presence of that dependent is also shown.
Taxpayers with dependent children pay lower taxes than similar families without children
through the following major tax provisions of the individual income tax:
Filing status – Unmarried taxpayers who are supporting a dependent child may be eligible to
file as a head of household, instead of as a single filer. Head of household status has a higher
standard deduction, and income is taxed under a separate rate bracket structure that is more
generous than the brackets available to single filers.
Child credit (CTC) – Taxpayers may be eligible for a partially refundable child credit of
$2,000 for each child up through age 16 with a valid social security number. In general, the
CTC is non-refundable, but taxpayers with insufficient tax liability to claim the entire CTC
may claim the refundable additional child credit (ACTC), which equals 15% of earned
income greater than $2,500, up to the lesser of (1) the value of the unused portion of the child
credit and (2) $1,400 per child. The CTC (combined with the amount of other dependent
credit [see below]) phases out beginning at $200,000 of modified adjusted gross income
(AGI) ($400,000 for married couples filing a joint return).
Other dependent credit (ODTC) – Taxpayers may be eligible for a non-refundable other
dependent credit of up to $500 for each qualifying dependent relative or child who is not
eligible for the child credit. The ODTC (combined with the amount of CTC [see above])
phases out beginning at $200,000 of modified AGI ($400,000 for married couples filing a
joint return).
Earned income tax credit (EITC) – Taxpayers may be eligible for a refundable EITC. The
amount of EITC a taxpayer may receive initially increases as the taxpayer earns more
income, then remains constant over a range of earned income, and then decreases as earned
income increases further. For families with one child, the maximum credit is $3,526. The
credit begins to phase out at a higher income level for married taxpayers and is more
generous for families with more children (up to three children). Taxpayers without
qualifying children may be eligible for a much smaller EITC.
American opportunity tax credit (AOTC) – Taxpayers with expenses related to their or their
dependent children’s post-secondary education may be eligible for the partially refundable
AOTC of up to $2,500, with up to $1,000 of the credit being refundable. The credit phases
out beginning at $80,000 of modified AGI ($160,000 for joint filers) and is available for 4
years.
Child and dependent care credit (CDCTC) – Taxpayers with expenses for caring for a
qualifying individual, which may be a child or an adult, may be eligible for a non-refundable
CDCTC. The credit is generally available for working taxpayers with dependent children
under age 13, but it is also available for working taxpayers supporting parents or other
dependents needing care. The maximum credit rate is 35% of up to $3,000 of child care
U.S. Department of the Treasury
Office of Tax Analysis
May 2019
2
expenses for 1 child and $6,000 for 2 or more children. The credit rate phases down
beginning at incomes of $15,000 until the rate reaches 20% at incomes above $43,000.
In order to produce these figures, a number of simplifying assumptions about the families are
made. First, all income comes from wages, and families are only eligible for the benefits listed
above. Second, 15% of family income is spent on items that qualify for an itemized deduction.
1
Examples of such items include mortgage interest expenses, state and local income and property
tax payments, and charitable contributions. Third, taxpayers choose to itemize their deductions
or claim the standard deduction in order to minimize their tax liability.
The second and third assumptions have an important implication when trying to interpret the
figures that follow. The lines labeled “stylized marginal tax rate” are calculated as follows. At
each AGI level, the taxpayer is given an extra $1,000 of wages.
2
The second assumption implies
the taxpayer therefore has an additional $150 of itemizable expenses. The taxpayer, by the third
assumption, re-determines whether to itemize deductions or claim the standard deduction.
Taxable income—in this case wages less either the standard deduction or itemized deductions—
is then recalculated, and the relevant tax rates and credits are applied to determine the tax
liability.
3
The difference in liability is divided by the $1,000 change in income to get a stylized
marginal tax rate.
Figure 1 presents the stylized marginal tax rate and average tax rate faced by a single filer. The
stylized marginal tax rate deviates from the statutory marginal rate schedule due to the EITC at
low income levels and the switch to itemization at higher income levels. The EITC decreases the
stylized marginal tax rate as the credit phases in and increases it as the credit phases out.
Figure 2 presents on the left axis the stylized marginal tax rate and average income tax rate
faced by a married filer with one dependent child but no child care expenses. The figure presents
on the right axis the amount of tax support the family receives as a result of the child. The
stylized marginal tax rate is large and negative as the EITC and ACTC phase in and is large and
positive as the EITC phases out. If this figure were continued on for higher income families,
there would be a temporary increase in the stylized marginal tax rate as the CTC begins to phase
out at $400,000.
Figure 2A presents the same information but focuses on families with low and modest incomes
who are not able to claim the full child credit. This figure decomposes the total tax support for
1
To reflect the $10,000 cap on state and local tax deductions under TCJA, the previous Treasury assumption of 18%
has been decreased to 15%.
2
Stylized marginal tax rates are calculated based on thousand dollar earnings increments, except in Figure 1 which
(without loss of comparability) uses hundred dollar increments in order to conform to the lower income scale on the
horizontal axis.
3
For taxpayers who claim the standard deduction, taxable income increases by the $1,000 increase in wages. The
second assumption implies that, for taxpayers who itemize their deductions, taxable income increases by $850—the
$1,000 increase in wages less 15%, or $150, for the commensurate increase in itemizable expenses. This implies
that once a taxpayer begins to itemize deductions (and ignoring phase-outs of any credits), the stylized marginal tax
rate is equal to the statutory marginal rate reduced by 15%.
U.S. Department of the Treasury
Office of Tax Analysis
May 2019
3
the child into the contribution of the CTC (green), the ACTC (gray), and the EITC (blue).
4
Families with the lowest incomes will receive less than the full value of the CTC due to
insufficient income, and the benefit to families with slightly more income is constrained by the
$1,400 limit on the credit’s refundability.
Figure 3 replicates Figure 2 for a head of household filer with one dependent child but no
childcare expenses. The stylized marginal tax rate shares all of the key features seen in Figure 2,
but with a less generous underlying statutory marginal rate schedule and credits that phase out at
lower income levels. The amount of tax support for this family type includes the added element
that the child creates eligibility for head of household status—and thus a more generous rate
schedule than applies to other unmarried taxpayers. The portion of the tax support due to the
difference in schedules is shown in a lighter shade than the portion due to the remaining child-
related provisions.
Figure 4 presents the stylized marginal tax rate and average tax rate faced by a married couple
with a dependent student who is assumed to have sufficient education expenses to qualify for the
maximum amount of the AOTC. The figure also presents the amount of tax support the filer
receives as a result of the student. Key differences between this figure and Figure 2 are the large
initial benefit from the refundable portion of the AOTC, which affects tax support but not
stylized marginal rates; eligibility for the ODTC instead of the CTC and ACTC; and high
stylized marginal tax rates as the AOTC phases out.
Figure 5 presents the stylized marginal tax rate and average tax rate faced by a joint filer with
one dependent child and sufficient child care expenses to qualify for the maximum CDCTC. The
figure also presents the amount of tax support the filer receives as a result of the child. Key
differences between this figure and Figure 2 are the higher marginal rates for taxpayers earning
modest incomes as the CDCTC phases down and the additional benefit from this credit for
taxpayers at all but the lowest levels of income.
4
The tax support for a child due to the EITC is the value of the EITC for a family with one child less the value of
the EITC to that family in absence of that child. This effect is most visible at the lowest income, where the EITC for
workers without children is also phasing in.
U.S. Department of the Treasury
Office of Tax Analysis
May 2019
...
re
0::
X
re
I-
30%
20%
10%
0%
-
10%
-20%
...
-
--
-
;
,/
I
,
'
I
.
-
f-
•
Figure 1
Stylized Marginal and Average Tax Rates and as Family Income Increases
Si
n
gle
F
iler
No Dependents
Current
L
aw
-
Tax
Year 2019
itemizing
begins
here
.J.,
I
--
--
-.,.
...
---
__
..
..
--
--
_..
,
,.,..
.;
-
,
-
.--
,,,.
,,,,,.
;
24%
br
ac
ke
t begins
here •
-
f-
>-
"'-income tax
liability begins
here.
-
-
--
-
-
32%
b
ra
cke
t
beg
i
ns
here •
-
-
se
-in
EITCpha
f-12
% bracket
-
sty
lized
Marg
inal Tax Rate
{left
axis)
begins
at
$2
1
,900
-
- Average Tax Rate {l
eft
axi
s)
f-10%
bracket begins at
$12,
i
00
0
20
40
60
80
100
1
20
140
1
60
180
Adjusted Gross Income {All I
ncome
from
Wages)
($000)
--
-
200
4
U.S. Department of the Treasury
Office of Tax Analysis
May 2019
20%
0%
-20
%
(1)
...
ro
0:::
-
40%
X
ro
I-
-6
0%
-
80%
-
100%
-12
0%
0
Figure 2
Stylized Marginal and Average
Tax
Rates and
Tax
Support
for
Joint Filer
with
One Dependent Child
under
17
Current Law - 2019
~-----•
EITC
phases
out
~•
CTC
phases
in
itemizing begins
-1,
-~-------
-----~----------
,
,
,
,
I
-------
---
,-
1'\.income tax liability
begi
ns
~
12
% bracket begins
--
--------
~22%
bracket begins
~
10% br
ac
ket beg
in
s at $24,400
butt
ax
payer
face
s no t
ax
due to
p
hase-i
n of
no
n-r
ef
un
da
b
le
port
io
n of the
CT
C.
EIT
C and
ACTC
ph
ase-i
n
20
40
60
80
100
120
140
160
32% bracket begins
at
around
$360k and family
credits begin
to
phase
out
at$400k
•
~24%
bracket begins
- Tax Su
pport
for
Chi
ld
(right
axis)
- Styli
zed
Marginal Tax
Rate
(left
axis)
- - -
Av
e
rage
Tax
Rate
(left
axis)
180
200 220 240
260
Adjusted
Gross
Income (All Income
from
Wages)
($000)
280
1
2,000
1
0,000
8,000
~
:E!
.c
u
6,000
~
.E
t::
0
0..
0..
:::,
Vl
4,000
2,000
0
5
U.S. Department of the Treasury
Office of Tax Analysis
May 2019
20%
0%
-20%
Cl)
+-
ro
er::
X
ro
I-
-40%
-60%
-80%
-
100%
-
120%
0
f--
------
•
EITC Phase-in
Figure
2A-
Moderate
Income Focus
Stylized Marginal and Average Tax
Ra
t
es
and
Tax
Support
for
Joint Filer
with
One Dependent Ch
il
d
under
17
Current L
aw
- 2019
---
------
--
--
--
--
--
--
-
--
--
--
--
.,-
EITC
(right
axis)
-------
!'\.income tax
liability begins
here.
'
,
...
.......
---
.,--
----~~
-
CTC
(right
axis)
-
ACTC
(right
axis)
f--
------
•
ACTC
phase-in
10
20
- Styliz
ed
Marginal
Tax Rate (l
eft
axis)
- - - Ave rage Tax Rate
(left
axis)
f--
10% bracket begins
at
$24,
400
but
taxpayer faces
no
tax
due
to
phase-in
of
non
-refundable portion
of
the
CTC.
30
40
~
1
2%
bracket
begi
ns
so
Adjusted Gross I
ncome
(A
ll
Income
from
Wages)
($000)
12000
10000
8000
0:
:E
..r::
u
6000
~
.E
t:'.
0
a.
a.
::,
Vl
4000
2000
0
6
U.S. Department of the Treasury
Office of Tax Analysis
May 2019
20%
0%
-20
%
(1)
...
ro
0:::
-
40%
X
ro
I-
-60
%
-8
0%
-
100%
-12
0%
Figure 3
Stylized Marginal and Average
Tax
Rates and
Tax
Support
for
Head
of
Household Filer
with
One Dependent Child
under
17
Current Law - 2019
~-----•
EITC
phases
out
~•
CTC
phases
in
~-----
---------1
,
,
--
---
-----
,-
, r'\.income t , liability
begins
itemizing
begi
ns
-1,
child credit ph
ases
out
--------------
----------------
-----
---
I
- Tax
Support
for
Child
(right
axis)
Fi
l
ing
Status Change
I
I
~12%
bracket
~22%
bracket
~24%
bracket
begins
begi
ns
~ 1
0%
br
ac
ket begins at $24,400 but taxpayer
faces
no tax due
to
~
ase.in-of
---f'l
on-refundable portion
of
the
CTC.
~-•
f lTCand
ACT
C
phase
-
in
-
sty
lized
Marginal
Tax Rate (l
eft
axis)
- - - Average Tax Rate
(left
axis)
~32%
bracket
begi
ns
1
2,000
1
0,000
8,000
6,000
4,000
2,000
--
~
-----------------------------------------------~
o
0
20
40
60
80
100
120
140
160
180
200 220 240
260
280
Adjusted Gross
Income
(All I
ncome
from
Wages)
($000)
~
:E!
.c
u
~
.E
t::
0
0..
0..
:::,
Vl
7
U.S. Department of the Treasury
Office of Tax Analysis
May 2019
20%
0%
-
20%
(1l
..,
ro
0:::
-
40%
X
ro
I-
-
60%
-
80%
-
100%
-
120%
,
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
Figure 4
Stylized Marginal and Average Tax
Ra
t
es
and Tax Support
for
Jo
int
Filer
with
One Dependent College Student
Current L
aw
- 2019
f--
-----
• EITC phases
out
f--•
CTC
phases
in
.,.------
------
~ income
tax
liability
begins
f--12% bracket begins
itemizing begins
.J,,
-----
-------
f--22% bracket begins
~
10% br
acke
t
begi
ns at $24,400 but taxp
aye
r
faces
no t
ax
due to
ph
ase-
in
of non-ref
un
dab
le
po
rtion of the
ere.
-----------------------
32% bracket begins
at
around
$360k and family
credits begin
to
phase
out
at$400k
•
f--24% brack
et
begins
- Tax Sup
port
fo
r Child {right ax
is)
- Stylized
Ma
rginal Tax Rate
{left
ax
is)
---
Average Tax Rate
{left
axis)
AO
TC
ph
ase-ou
t •
~
40% of AOTC ($1,
000
)
is
ful
ly
ref
unda
bl
e
~-•
EIT
Cand
ACTC
ph
ase-in
0
20
40
60
80
100
120
140
160
180
200
220
240
260
Adjusted Gross Income {All Income
from
Wages)
($000)
1
2,000
1
0,000
8,000
~
:!:!
.s::
u
6,000
~
.E
t::
0
c..
c..
:::,
V,
4,000
2
,00
0
0
280
8
U.S. Department of the Treasury
Office of Tax Analysis
May 2019
20%
0%
-20
%
(1)
...
ro
0:::
-
40%
X
ro
I-
-60
%
-8
0%
-
100%
-12
0%
/
I
I
Figure 5
Stylized Marginal and Average
Tax
Rates and
Tax
Support
for
Joint
Filer
with
One Dependent Child
under
17
and Child Care Expenses
Current Law - 2019
~-----•
EITC
phases
out
~•
CTC
phases
in
'
--
----
r'\.income tax liability
begins
~
12
% bracket begins
itemizing begins
-1,
--
-
...
-
...
-
~22%
bracket begins
~
10% br
ac
ket beg
in
s at $24,400
butt
ax
payer
face
s no t
ax
due to
p
hase-i
n of
no
n-r
ef
un
da
b
le
port
io
n of the
CT
C.
------
-------
32% brack
et
begins
at
around
$360k and family
credits begin
to
phase out
at$400
k•
~24%
bracket begins
- Tax Support
for
Child (right axis)
- Stylized Marginal Tax
Rate
(left
axis)
- - Average Tax
Rate
(l
eft
axis)
At
hi
gher
in
co
m
es
, t
ax
p
aye
rs
cla
im the
f
ull
c
hil
d cr
edit
and $600 of C
DCTC.
~-
•
EIT
C and
ACTC
ph
ase-i
n
0
20
40
60
80
100
120
140
160
180
200 220 240
260
Adjusted Gross Income (All Income
from
Wages)
($000)
1
2,000
1
0,000
8,000
~
:E!
.c
u
6,000
~
.E
t::
0
0..
0..
:::,
Vl
4,000
2,000
0
280
9
U.S. Department of the Treasury
Office of Tax Analysis
May 2019
Download
Save PDF to desktop
Email
Email completed PDF
Send for Signing
Email for others to sign
Print
Print document
Choose a Field
Click on a field and
select the person that should complete it
Want to add a signature?
You can add a signature field
and assign it to someone else
to sign
Choose a Field
Click on a field and
select the person that should complete it

Stylized Marginal And Average Income Tax Rates (Department of the Treasury - OCIO)

This document is locked as it has been sent for signing.

You have successfully completed this document.

Other parties need to complete fields in the document. You will recieve an email notification when the document has been completed by all parties.

This document has been signed by all parties.

Completed 10 August 2020

Message

View Audit Log
Print With Audit Log
Duplicate Document