Ever tried to calculate how much tax you owe on your income by hand? If you have, you know how difficult and error-prone the technique is. Fortunately, by using a spreadsheet formula, you can figure out how much income tax you owe automatically. Let’s learn **how to use the formula for income tax calculation in Microsoft Excel.**

## How to Use the Formula for Income Tax Calculation in Excel

Income taxes are structured in brackets. This means that you pay a certain percentage for a given range of income. To use the formula for income tax calculation, you’ll need three key inputs:

- The maximum income for each bracket
- The tax rate for each bracket
- The cumulative tax owed

Arrange your data in a table like the one below. The bracket with a maximum of $9,875 has a tax rate of 10%; the bracket with $40,125 max is 12%, and so on. The Cumulative Tax Owed is computed with the formula you see in the formula bar.

To build the formula for income tax calculation, click into cell **F2.** You want to find how much your income tax will be if you make **$53,125.**

The formula consists of a trio of **XLOOKUP** functions. These incorporate your cumulative tax, along with the tax rate for your exact level of income:

=XLOOKUP(F1,A2:A5,C2:C5,,-1)+(F1-XLOOKUP(F1,A2:A5,A2:A5,,-1))*XLOOKUP(F1,A2:A5,B2:B5,,-1)

The easiest way to input this formula is to paste it into the formula bar in cell **F2. **If you have additional income brackets listed, simply adjust the referenced ranges to incorporate the entirety of columns **A**, **B**, and **C**, respectively.

Hit **Enter** on your keyboard when you have the formula inputted, and your tax value returns: **$7,477.50. **Note that the formula will work for any value you place in cell F1, as long as it doesn’t exceed the **$85,525** range of your tax table.

As you can see, Microsoft Excel makes it a breeze to use the formula for income tax calculation.