Marginal and Average Income Tax Rates and Tax Support 

for Families with Children and Students 

as Family Income Increases

2015 Law

Office of Tax Analysis

July 31, 2015
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 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: 

• Personal exemptions – taxpayers may claim an exemption of $4,000 for each taxpayer and

dependent child (including students through age 23). 

• 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 a more favorable rate structure than is available to single filers. 

• Child credit – taxpayers may be eligible for a partially refundable child credit of $1,000 for 

each child up through age 16. In general, the child credit is non-refundable, but taxpayers 

with insufficient tax liability may claim the refundable additional child credit for 15% of 

earned income greater than $3,000 up to the value of the unused portion of the child credit. 

The child credit phases out beginning at $75,000 ($110,000 for married filers). 

• Earned income tax credit (EITC) – taxpayers may be eligible for a refundable earned income 

tax credit. The credit initially phases in with income, remains constant over a range of 

income, and then phases out as income increases further. For families with one child, the 

maximum credit is $3,359. 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 3). Taxpayers 

without qualifying children may be eligible for a much smaller EITC.

• American opportunity tax credit (AOTC) – taxpayers with education expenses may be 

eligible for an AOTC of up to $2,500, with up to 40% of the credit being refundable. The 

credit phases out beginning at $80,000 ($160,000 for joint filers) and is available for four 

years. 

• Child and dependent care tax credit (CDCTC) – taxpayers with child care expenses may be 

eligible for a nonrefundable child and dependent care tax credit. The maximum credit rate is 

35% of up to $3,000 of child care expenses for one child and $6,000 for two or more children 

and the credit rate phases down with income until reaching 20% (for a $600 or $1,200 

maximum credit) at incomes in excess of $43,000. The credit is available for children under 

age 13. 

In order to produce these figures, a number of simplifying assumptions about the families were 

made. First, the examples assume that all income is earned income (e.g., wages) and families are 

only eligible for the benefits listed above. Second, taxpayers may claim a standard deduction 

that varies with filing status or itemize deductions. The examples assume that 18 percent of 

family income will be spent on expenses that would qualify for an itemized deduction, and that 

the family itemizes when it is tax beneficial to do so. Because itemized expenses and therefore 

deductions rise with income (at a rate of 18 percent), the marginal tax rate for itemizers is 

U.S. Department of the Treasury

Office of Tax Analysis

July 31, 2015

2
reduced by 0.18 times the statutory tax rate. The presentation also includes a simplified

alternative minimum tax which reduces the value of itemized deductions and personal 

exemptions. Certain other provisions (“PEP” and “Pease”) reduce or phase-out the value of 

personal exemptions and itemized deductions, but at higher levels of income than shown on 

these graphs. The figures are illustrative and do not account for the specific circumstances of 

any actual family that would affect their tax liability. Marginal tax rates are calculated based on 

thousand dollar earnings increments, except in Figure 1 which uses hundred dollar increments. 

Figure 1 presents the marginal and average tax rates faced by a single filer. The actual marginal 

tax rate deviates from the statutory marginal rate schedule due to the EITC and itemization. The 

EITC decreases the marginal tax rate as the credit phases in, and increases it as the credit phases 

out. Itemization drops the rate of tax on the last dollar earned. 

Figure 2 presents the marginal and average income tax rates faced by a married filer with one 

dependent child and no child care expenses. The figure also presents the amount of tax support 

the family receives as a result of the child. Key components of the marginal tax rate are the large 

negative tax rates as the EITC and additional child credit phase in followed by a high marginal 

rate as the EITC phases out; a drop in the marginal tax rate due to itemizing; a temporary

increase in the marginal tax rate as the child credit phases out; and a loss of any further tax 

support on behalf of the child as the family enters the AMT (marginal rates rise slightly). 

Figure 3 repeats Figure 2 for a head of household filer with one dependent child and no 

childcare expenses. The marginal rate graph in Figure 3 shares all of the key features seen in 

Figure 2, but with a less generous underlying statutory marginal rate schedule and lower income 

levels for credit phase-outs. 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 blue than the portion due to the remaining childrelated provisions. 

Figure 4 presents the marginal and average tax rates faced by a married filer with a dependent 

student who is assumed to have sufficient education expenses to qualify for the maximum credit. 

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 marginal rates; no eligibility for the child 

credit; and higher marginal tax rates as the AOTC phases out.

Figure 5 presents the marginal and average tax rates faced by a head of household filer with one 

dependent child and sufficient child care expenses to qualify for the maximum child and 

dependent care credit. 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 3 are the higher marginal 

rates for taxpayers earning modest incomes as the child and dependent care credit phases down, 

and the additional benefit from this credit affecting taxpayers at all but the lowest levels of 

income. U.S. Department of the Treasury

Office of Tax Analysis

July 31, 2015

3
-20%

-10%

0%

10%

20%

30%

0 20 40 60 80 100

Tax Rate

Adjusted Gross Income (All Income from Wages) ($000)

Figure 1 

Marginal and Average Tax Rates as Family Income Increases

Single Filer No Dependents

Tax Year 2015

Marginal Tax Rate

Average Tax Rate

10% bracket

begins →

← 15% bracket begins ←25% bracket begins

taxpayers begin to 

↓itemize 

EITC phases out

←−−−−→

↖ income tax liability begins

←−−−−→

EITC phases in

EITC 

plateau

↓

U.S. Department of the Treasury

Office of Tax Analysis

July 31, 2015

4
0

4,000

8,000

12,000

16,000

20,000

-60%

-40%

-20%

0%

20%

40%

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280

Support for Child ($)

Adjusted Gross Income (All Income from Wages) ($000)

Tax Rates

Figure 2

Marginal and Average Tax Rates and and Tax Support for a Child for 

Joint Filer with One Dependent Child

Tax Year 2015

Tax Support for Child (right axis)

Marginal Tax Rate (left axis)

Average Tax Rate (left axis)

←−−−→

child credit 

phases out 

← 10% bracket begins

←15% bracket begins

← 25% bracket begins 

←−−−→

EITC phases 

out

itemizing 

begins

↓

↖ income tax liability begins

28% bracket 

←begins

←−−→EITC and child credit phase in

AMT liability 

begins→ 

U.S. Department of the Treasury

Office of Tax Analysis

July 31, 2015

5
0

4,000

8,000

12,000

16,000

20,000

-60%

-40%

-20%

0%

20%

40%

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280

Support for Child ($)

Adjusted Gross Income (All Income from Wages) ($000)

Tax Rates

Figure 3

Marginal and Average Tax Rates and and Tax Support for a Child for 

Head of Household Filer with One Dependent Child

Tax Year 2015

Tax Support for Child (right axis)

Tax Support from Filing Status Change (right axis)

Marginal Tax Rate (left axis)

Average Tax Rate (left axis)

←−−−→

← 10% bracket begins

←15% bracket begins

← 25% bracket begins 

←−−−→

EITC 

phases 

out

itemizing 

begins

↓

↖ income tax liability begins

←28% bracket and AMT liability begins

←−−−→

EITC and child credit phase in

33% bracket 

begins→ 

child 

credit 

phases 

out 

U.S. Department of the Treasury

Office of Tax Analysis

July 31, 2015

6
0

4,000

8,000

12,000

16,000

20,000

-60%

-40%

-20%

0%

20%

40%

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280

Support for Student ($)

Adjusted Gross Income (All Income from Wages) ($000)

Tax Rates

Figure 4

Marginal and Average Tax Rates and and Tax Support for a Student for 

Joint Filer with One Dependent Student

Tax Year 2015

Tax Support for Student (right axis)

Marginal Tax Rate (left axis)

Average Tax Rate (left axis)

←−−−→

AOTC 

phases out 

← 10% bracket begins

←15% bracket begins

← 25% bracket begins 

←−−−→

EITC phases 

out

itemizing 

begins

↓

↖ income tax liability 

begins

28% bracket 

←begins

←−−→EITC phases in and family receives refundable AOTC

AMT liability 

begins→ 

U.S. Department of the Treasury

Office of Tax Analysis

July 31, 2015

7
0

4,000

8,000

12,000

16,000

20,000

-60%

-40%

-20%

0%

20%

40%

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280

Support for Child ($)

Adjusted Gross Income (All Income from Wages) ($000)

Tax Rates

Figure 5

Marginal and Average Tax Rates and and Tax Support for a Child for 

Head of Household Filer with One Dependent Child in Dependent Care

Tax Year 2015

Tax Support for Child (right axis)

Tax Support from Filing Status Change (right axis)

Marginal Tax Rate (left axis)

Average Tax Rate (left axis)

←−−−→

← 10% bracket begins

←15% bracket begins

← 25% bracket begins 

←−−−→

EITC 

phases 

out

itemizing 

begins

↓

↖ income tax liability begins

←28% bracket and AMT liability begins

←−−−→

EITC and child credit phase in

33% bracket begins→ 

child 

credit 

phases 

out 

U.S. Department of the Treasury

Office of Tax Analysis

July 31, 2015

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