# Income Tax - US

#### Progressive Tax Rates in Voyant

The default in Voyant US is Progressive Taxation. You can see this in two places Year View > Taxes > Federal Tax Rates

And the brackets can be customized in Plan Settings > Federal Tax Brackets.

Note: A progressive tax system is one where the tax rate increases as the taxable amount increases.
In such a system, those who earn higher incomes pay a higher percentage of their income in taxes, while those with lower incomes pay a lower percentage.

The idea behind a progressive tax system is to distribute the tax burden more equitably and to help address income inequality by having those who can afford it contribute a larger share of their income to taxes.

Here's a simplified example to illustrate the difference:

Let's say there's a progressive tax system with three income brackets and the client's income is \$100,000.

Income up to \$50,000 is taxed at 10%.
Income between \$50,001 and \$100,000 is taxed at 20%.
Income above \$100,000 is taxed at 30%.

To calculate the income tax, we'll break down your income into the three tax brackets and apply the corresponding tax rates. Here's the breakdown:

Income up to \$50,000:

Tax rate: 10%
Income in this bracket: \$50,000 - \$0 = \$50,000
Tax in this bracket: \$50,000 * 10% = \$5,000

Income between \$50,001 and \$100,000:

Tax rate: 20%
Income in this bracket: \$100,000 - \$50,001 = \$49,999
Tax in this bracket: \$49,999 * 20% = \$9,999.80 (rounded to two decimal places)

Income above \$100,000:

Tax rate: 30%
There's no income in this bracket since your income is exactly \$100,000.

Now, let's sum up the taxes from each bracket:

Total Tax = Tax in first bracket + Tax in second bracket = \$5,000 + \$9,999.80 = \$14,999.80

So, if you make \$100,000 per year and your income is subject to the described progressive taxation, your income tax would be approximately \$14,999.80.

Note: The income thresholds will escalate each year by the percentage listed in the threshold escalation field.

#### Effective Tax Rates in Voyant

Voyant does offer the option to model Effective tax rates if an Adviser prefers.

To do this select "yes" on the dropdown "Are the tax brackets effective rates?"

Using this option will cause the software to tax the income at the threshold rate that applies after deductions.

#### Flat Tax Rates In Voyant

To model a flat tax rate on all income in the plan the adviser would need to turn off the Federal Tax Brackets.

Next, they would need to review the tax rates in Taxes & Other Financial Information the Adviser would then be able to adjust the tax rate (if needed).

If you are using a flat rate and the income is subject to a 20% tax, it means that they would pay 20% of their total income in taxes. To calculate your income tax, Voyant would simply apply this rate to the income of \$100,000.

Income tax = Income * tax rate = \$100,000 * 20% = \$20,000
You will be able to see this in the Year View > Taxes > Effective Tax Rates