Methodology
A transparent look at the formulas, tax code references, and validation processes behind every LevyIO calculator.
Table of Contents
1. Progressive Tax Calculation
The Income Tax Calculator and Tax Bracket Calculator implement the U.S. progressive (marginal) tax system:
Taxable Income = Gross Income - Deductions (Standard or Itemized)
Federal Tax = Sum of (Income in Each Bracket x Bracket Rate)
2026 Federal Brackets (Single Filing):
10%: $0 - $11,925
12%: $11,926 - $48,475
22%: $48,476 - $103,350
24%: $103,351 - $197,300
32%: $197,301 - $250,525
35%: $250,526 - $626,350
37%: Over $626,350
Effective Tax Rate = Total Tax / Gross Income x 100
Marginal Tax Rate = Rate on the last dollar of income
Our Effective Tax Rate Calculator helps users understand the difference between their marginal rate and the actual percentage of income paid in taxes.
2. Capital Gains Tax
The Capital Gains Tax Calculator distinguishes between short-term and long-term capital gains:
Capital Gain = Sale Price - Purchase Price - Transaction Costs
Short-term (held < 1 year): Taxed as ordinary income
Long-term (held ≥ 1 year) 2026 Rates:
0%: Up to $48,350 (Single) / $96,700 (MFJ)
15%: $48,351 - $533,400 (Single) / $96,701 - $600,050 (MFJ)
20%: Above $533,400 (Single) / $600,050 (MFJ)
Net Investment Income Tax (NIIT): +3.8% above $200K (Single) / $250K (MFJ)
The Crypto Tax Calculator applies these same capital gains rules, as the IRS treats cryptocurrency as property for tax purposes (IRS Notice 2014-21).
3. Payroll and Self-Employment Taxes
The Paycheck Calculator and Self-Employment Tax Calculator compute FICA obligations:
Employee FICA:
Social Security: 6.2% up to $176,100 wage base (2026)
Medicare: 1.45% (no cap)
Additional Medicare: 0.9% above $200,000
Self-Employment Tax:
SE Tax Base = Net Earnings x 92.35%
SE Tax = (SE Base x 12.4% for SS) + (SE Base x 2.9% for Medicare)
Deductible: 50% of SE tax from gross income
4. State Tax Calculations
Our State Tax Calculator covers all 50 states and DC with three tax structure types:
- Progressive states (e.g., California, New York) — Multiple brackets applied similarly to federal progressive calculation.
- Flat tax states (e.g., Colorado 4.4%, Illinois 4.95%) — Single rate applied to taxable income after state-specific deductions.
- No income tax states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming) — Zero state income tax liability.
Each state calculation accounts for that state's specific deduction rules, exemptions, and credits where applicable. The Marriage Tax Calculator shows how filing status affects both federal and state tax liability.
5. Property and Sales Tax
Property Tax:
Annual Property Tax = Assessed Value x Millage Rate / 1,000
Effective Rate = Annual Tax / Fair Market Value x 100
Sales Tax:
Total Sales Tax = Price x (State Rate + Local Rate)
Tax-inclusive Price = Price x (1 + Combined Rate)
The Property Tax Calculator uses county-level assessment ratios and millage rates. The Sales Tax Calculator includes both state and average local rates for combined calculations.
6. Alternative Minimum Tax (AMT)
AMTI = Taxable Income + AMT Preference Items + AMT Adjustments
AMT Exemption (2026): $88,100 (Single) / $137,000 (MFJ)
Phase-out begins: $626,350 (Single) / $1,252,700 (MFJ)
AMT Rate: 26% on first $248,300, 28% above
Tentative Minimum Tax = AMT Rate x (AMTI - Exemption)
AMT Owed = max(0, Tentative Minimum Tax - Regular Tax)
7. Data Sources
All LevyIO calculators draw from these authoritative sources:
- Internal Revenue Service — IRC Sections 1, 55, 1401; Publications 15-T, 17, 505; Revenue Procedures for annual inflation adjustments.
- State revenue departments — Official tax rate schedules and instructions from all 50 states and DC.
- Tax Foundation — State tax policy comparisons and effective rate analysis.
- U.S. Census Bureau — Property value estimates and income distribution data.
- Congressional Budget Office (CBO) — Tax policy analysis and distributional estimates referenced in our educational content.
8. Validation Process
Every calculator undergoes multi-step validation:
- IRS example verification — Calculators are tested against official IRS worked examples from publications and instructions.
- Bracket boundary testing — Results are verified at every tax bracket boundary to ensure correct marginal rate transitions.
- Cross-filing comparison — All filing statuses (Single, MFJ, MFS, HoH, QSS) are tested to verify correct bracket and deduction application.
- Year-over-year validation — When new tax year adjustments are released, we verify that inflation indexing is applied correctly across all affected parameters.
- State parity checks — State tax calculations are verified against each state's official tax forms and instructions.
9. Limitations
Users should understand these limitations:
- Estimates, not filings — Our calculators provide estimates for planning purposes. They are not a substitute for official tax preparation software or professional tax advice.
- Standard scenarios — Complex situations involving multiple income sources, foreign tax credits, passive activity losses, or business deductions may not be fully captured.
- Local taxes — City and county income taxes (e.g., NYC, Philadelphia, Ohio municipal taxes) are not included in all calculators.
- Tax credits — Calculators generally do not include refundable or non-refundable tax credits (Child Tax Credit, EITC, etc.), which can significantly reduce tax liability.
- Legislative changes — Tax law can change mid-year. We update calculators as quickly as possible after legislation is enacted, but there may be a brief lag.