### Step 1 – Set up Income Tax Slab

To illustrate how to calculate taxes, weâ€™ll use the following tax rate sample:

- A flat
**7%**Â for incomes**0**to**$10,000**. **$750 + 12%**for income fromÂ**$10,001**to**$15,000**.**$1000 + 18%**for income fromÂ**$15,001**to**$20,000**.**$1,350 + 27%**for income fromÂ**$20,001**to**$30,000**.**$1,700 + 32%**for income fromÂ**$30,001**and higher.

### Step 2 – Input Income Data

- Create the required
**Headers**. - Type the
**Names**. - Input the precise
**Salary amounts.**

### Step 3: Use Excel IF Function

- Select cell
**D13**. - Type the following formula:

`=IF(C13<=$C$6,C13*$D$6,IF(C13<=$C$7,(C13-$C$6)*$D$7+750,IF(C13<=$C$8,(C13-$C$7)*$D$8+1000,IF(C13<=$C$9,(C13-$C$8)*$D$9+1350,(C13-$C$9)*$D$10+1700))))`

- Press
**Enter**. The function willÂ return the accurate**Tax value.**

### Final Output

- Use the
**AutoFill**tool to return the other income taxes.

**How Does the Formula Work?**

The **IF **function tests a logical operation. If itâ€™s **True**, the formula returns a value. Otherwise, returns another value.

- Here, if
**C13**is equal to or less than**C6**, itâ€™ll give**C13*$D$6 output.** - If
**C13**is greater than**C6**but equal to or less than**C7**, it returns**(C13-$C$6)*$D$7+750 output.** - However, when
**C13**is greater than**C7**but equal to or less than**C8**, it returns the output of**(C13-$C$7)*$D$8+1000**. - Again, when
**C13**is greater than**C8**but equal to or less than**C9**, it returns**(C13-$C$8)*$D$9+1350 outcome.** - Lastly, If
**C13**is greater than**C9**, it returns**(C13-$C$9)*$D$10+1700) output.**

## Some Other Suitable Ways to Calculate Income Tax in Excel

Moreover, we have other methods to calculate income tax in Excel besides the **IF **function. Here, weâ€™ll show you **2 **other functions that you can use for determining the income tax. Here we are going to use the same dataset above.

### Method 1 – Apply Excel VLOOKUP Function to Calculate Income Tax

In this method, weâ€™ll apply **the VLOOKUP function**. This function looks for a value in a range and returns a value from the specified column. The tax rate here is not like the earlier sample. So, follow the steps below to perform the task.

**Steps:**

- Select cell
**D13**. - Type the formula:

`=VLOOKUP(C13,$B$6:$D$10,3,TRUE)+(C13-VLOOKUP(C13,$B$6:$D$10,1,TRUE))*VLOOKUP(C13,$B$6:$D$10,3,TRUE)`

- Press
**Enter**to return the result.

- Use
**AutoFill**to complete the rest.

**How Does the Formula Work?**

**VLOOKUP(C13,$B$6:$D$10,3,TRUE)**

Firstly, this part of the formula looks for **C13** in the range **$B$6:$D$10**. Then, returns the rate from **column 3**.

**(C13-VLOOKUP(C13,$B$6:$D$10,1,TRUE))**

The **VLOOKUP **function looks for **C13 **in the range **$B$6:$D$10**. Returns the value from the **1st column**. Next, deducts the output from **C13**.

**VLOOKUP(C13,$B$6:$D$10,3,TRUE)+(C13-VLOOKUP(C13,$B$6:$D$10,1,TRUE))*VLOOKUP(C13,$B$6:$D$10,3,TRUE)**

At last, it multiplies the outputs of **VLOOKUP(C13,$B$6:$D$10,3,TRUE) **and **(C13-VLOOKUP(C13,$B$6:$D$10,1,TRUE))**. After that, add **VLOOKUP(C13,$B$6:$D$10,3,TRUE) **output to it.

**Read More: **How to Calculate Social Security Tax in Excel

### Method 2 – Income Tax Calculation with SUMPRODUCT Function in Excel

**Steps:**

- Select cell
**D14**. - Type the formula:

`=SUMPRODUCT($D$7:$D$11-$D$6:$D$10,C14-$B$7:$B$11,N(C14>$B$7:$B$11))`

- Press
**Enter**.

- Use
**AutoFill**to fill the rest of the series.

**How Does the Formula Work?**

**N(C14>$B$7:$B$11)**

Firstly, this formula returns **0**. **The N function** changes texts to number values, dates to serial numbers, and **True **to **1**. Other than that, it returns **0**.

**$D$7:$D$11-$D$6:$D$10**

In this part, the formula finds out the differential rates.

**C14-$B$7:$B$11**

Weâ€™ll get the amount to each differential rate here.

**SUMPRODUCT($D$7:$D$11-$D$6:$D$10,C14-$B$7:$B$11,N(C14>$B$7:$B$11))**

Eventually, the formula will add all the product outputs.

**Read More: **Formula for Calculating Withholding Tax in Excel

**Download Practice Workbook**

Download the following workbook for practice.

## Related Articles

- Reverse Tax Calculation Formula in Excel
- How to Calculate Marginal Tax Rate in Excel
- How to Calculate Federal Tax Rate in Excel
- How to Calculate Sales Tax in Excel

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