**Method 1 – Use the Taxable Income to Compute the Income Tax in Excel**

**STEPS:**

- Enter the
*Gross Income*: the whole amount received from all sources, including refunds, discounts, and allowances, before subtracting any costs or taxes. - Enter the
*Total Deductions*and the*Total Exemptions.*

- Select a cell to compute the taxable income.

To calculate the taxable income, subtract total deductions and total exemptions from gross income:

- Enter the formula:

`=C4-C5-C6`

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

- For an income below
**$10,500**, the tax rate is**10%**. - Enter the formula:

`=C7*10/100`

- Press
**Enter**. The formula will be displayed in the formula bar.

**Method 2 – Computing the Income Tax with Tax Brackets**

**STEPS:**

- Enter the
*Gross Income, Total Deductions*and*Total Exemptions*. - Set the information of the
**Taxable Income Bracket**and the**Tax Rate**for every range in**Taxable Income**.

To compute the tax based on the tax bracket:

- split the taxable income into tax brackets. Assume that your taxable income is within
**$90,000**and**$180,000**, which is included in the**4th**tax bracket.

The fourth tax band has rates of **10%**, **12%**, **22%**, and **24%** . Get the *Tax Rate of Taxable Amount* by subtracting the upper limit and the lower limit of the *Taxable Income Bracket. *For a **10%** tax rate the taxable income bracket ranges **$0 to $10,275**. So, (**$10,275 – $0**) **= $10,275**. Calculate the tax with a tax rate of **10%**.

- Enter the formula:

`=10275*10/100`

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

The taxable income range for a **20%** tax rate is **$10,275** to **$41,775**. So, (**$41,775** **–** **$10,275**) equals **$31,500**. For a tax rate of **20%:**

- Enter the formula in
**C6**.

`=31500*20/100`

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

The range for a **22%** tax rate is **$41,775 **to **$89,075**. The result of the subtraction is (**$89,075** **–** **$41,775**) **=** **$47,300**. For a tax rate of **22%:**

- Enter the formula in
**C7**.

`=47300*22/100`

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

For a **24% **tax rate, the taxable income bracket ranges **$89,075 **to** $170,050**. So, (**$10,275** **– $89,075**) **=** **$25,925**.

- Enter the formula:

`=25925*24/100`

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

Calculate the **Taxable Income**,

- Select the cell and enter the formula:

`=C4-C5-C6`

- Press
**Enter**.

Compute the **Total Tax:**

- Enter the formula:

`=F5+F6+F7+F8`

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

**Method 3 – Use the IF Function to calculate the Income Tax in Excel**

**STEPS:**

- Enter data: the
**Name**of the employees and their**Total Income**. - Enter the
**Lower Limit**and the**Upper Limit**of the**Tax Rate**.

- Select the cell and enter the formula to calculate the
**Income Tax**.

`=IF(C5<$C$12,"$0",IF(C5<=$C$13,(C5-8000)*$D$13,IF(C5<=$C$14,(C5-15000)*$D$14,IF(C5<=$C$15,(C5-22000)*$D$15,IF(C5<=$C$16,(C5-29000)*$D$16,IF(C5>$C$16,(C5-36000)*$D$17))))))`

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

- Drag down the Fill Handle to see the result in the rest of the cells.

You can see the **Income Tax:**

** Formula Breakdown**

**IF(C5>$C$16,(C5-36000)*$D$17):**compares the upper limit and the income tax. Subtracts the upper limit from the income tax and multiplies the tax rate by the result.**IF(C5<=$C$13,(C5-8000)*$D$13,IF(C5<=$C$14,(C5-15000)*$D$14,IF(C5<=$C$15,(C5-22000)*$D$15,IF(C5<=$C$16,(C5-29000)*$D$16,IF(C5>$C$16,(C5-36000)*$D$17))))):**evaluates the income tax and the upper limit and multiplies the outcome by the tax rate.**IF(C5<$C$12,”$0″,IF(C5<=$C$13,(C5-8000)*$D$13,IF(C5<=$C$14,(C5-15000)*$D$14,IF(C5<=$C$15,(C5-22000)*$D$15,IF(C5<=$C$16,(C5-29000)*$D$16,IF(C5>$C$16,(C5-36000)*$D$17)))))):**compares with**$0**and gets the result of the income tax using this formula.

- Select a cell where to get the
**Highest Tax**. - Enter the formula:

`=(B13-B12)*D12`

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

The result will be displayed in the selected cell, and the formula in the formula bar.

- Drag down the Fill Handle to see the result in the rest of the cells.

The **Highest Tax** is calculated.

To find the **Cumulative Tax (**the tax payable on an employee’s total income from **January 1** to the present):

- Select the cell to see the cumulative tax.
- Enter the formula:

`=(C13-C12)*E12`

- Press
**Enter**.

For the **second **cumulative tax:

- Enter the formula:

`=E12+E13`

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

- Drag down the Fill Handle to see the result in the rest of the cells.

This is the output.

To calculate the individual cumulative tax:

- Select a cell to see the result.
- Enter the formula (the summation of the
**Cumulative Tax**and the**Income****T****ax**).

`=F12+D5`

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

- Drag down the Fill Handle to see the result in the rest of the cells.

This is the output.

**Method 4 – Applying the VLOOKUP Function to Compute the Income Tax in Excel**

**STEPS:**

- Select a cell to calculate the income tax for an employee.
- Enter the formula:

`=VLOOKUP(C5,$B$12:$D$17,3,TRUE)+(C5-VLOOKUP(C5,$B$12:$D$17,1,TRUE))*VLOOKUP(C5,$B$12:$D$17,3,TRUE)`

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

- Drag down the Fill Handle to see the result in the rest of the cells.

This is the output.

**Formula Breakdown**

**(C5-VLOOKUP(C5,$B$12:$D$17,1,TRUE))*VLOOKUP(C5,$B$12:$D$17,3,TRUE):**gets cell information from each specified cell and multiplies it by another specified cell.**VLOOKUP(C5,$B$12:$D$17,3,TRUE)+(C5-VLOOKUP(C5,$B$12:$D$17,1,TRUE))*VLOOKUP(C5,$B$12:$D$17,3,TRUE):**returns the income tax.

- Select a cell to see the highest tax rate.
- Enter the formula:

`=(B13-B12)*D12`

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

- Drag down the Fill Handle to see the result in the rest of the cells.

The **Highest Tax **is calculated. To determine the cumulative tax:

- Select a cell to display the cumulative tax.
- To calculate the
**first**cumulative tax, enter the formula:

`=(C13-C12)*E12`

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

Calculate the second cumulative tax:

- Enter the formula in the cell you want to see the outcome

`=E12+E13`

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

- Drag down the Fill Handle to see the result in the rest of the cells.

The cumulative tax is displayed. To calculate the individual cumulative tax.

- Choose a cell to show the result.
- Enter the formula:

`=F12+D5`

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

- Drag down the Fill Handle to see the result in the rest of the cells.

This is the output.

**Read More:** Income Tax Computation in Excel Format

**Things to Remember**

- When using the
**VLOOKUP**function, you must press**F4**key to lock the value of the table array. Otherwise, If you use the**Autofill**and drag the formula, you won’t obtain the true number. - You must press
**F4**to lock the result of the logical test when using the**IF**function.

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