Framework Library
The federal tax code, organized by mechanism.
How income is bracketed, how capital gains are taxed differently from wages, how worker classification changes your obligations, and where tax-advantaged accounts fit in.
How income is bracketed, how capital gains are taxed differently from wages, how worker classification changes your obligations, and where tax-advantaged accounts fit in.
The US uses a progressive, marginal system — each bracket rate applies only to the slice of income within that band, not your entire income. Figures shown are for a single filer.
Profit from selling an asset is taxed differently depending on how long it was held before sale.
Assets held one year or less are taxed as ordinary income, at your regular marginal bracket — up to 37%.
Assets held over one year qualify for preferential rates of 0%, 15%, or 20%, based on total taxable income.
An additional 3.8% surtax may apply to investment income for single filers above $200,000 MAGI ($250,000 MFJ).
Classification determines who withholds tax, who pays payroll tax, and which deductions are available.
| Mechanism | W-2 Employee | 1099 Contractor |
|---|---|---|
| Tax Withholding | Employer withholds automatically | Self-directed quarterly estimates |
| Payroll (FICA) Tax | Split with employer, 7.65% each | Self-employment tax, ~15.3% total |
| Business Expense Deductions | Generally not deductible | Ordinary & necessary expenses deductible |
| Retirement Plan Access | Employer-sponsored 401(k) | SEP-IRA, Solo 401(k), SIMPLE IRA |
| Health Coverage | Often employer-subsidized | Self-employed health insurance deduction |
Each account type defers, exempts, or shields a different slice of income.
Pre-tax contributions reduce current taxable income; withdrawals in retirement are taxed as ordinary income.
After-tax contributions grow tax-free; qualified withdrawals in retirement are untaxed entirely.
Triple tax advantage: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical costs.
Contributions grow tax-free at the federal level when used for qualified education expenses.
Plug your income and filing status into the full federal estimator on the Tax Simulators page.