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How to calculate progressive income tax in Excel and Google Sheets
Topic:Finance basicsExcel & Google Sheets
=IF(A2<=12500,0,IF(A2<=50000,(A2-12500)*0.2,IF(A2<=125000,7500+(A2-50000)*0.4,37500+(A2-125000)*0.45)))✓
Verified example
Computed by a real spreadsheet engine on the sample data below.
| Taxable Income | Tax Due |
| 10000 | |
| 30000 | |
| 75000 | |
| 150000 |
=IF(A2<=12500,0,IF(A2<=50000,(A2-12500)*0.2,IF(A2<=125000,7500+(A2-50000)*0.4,37500+(A2-125000)*0.45)))→0
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Step by step
- 1Enter taxable income (in whatever currency you use) in column A.
- 2In B2, enter the nested IF that calculates tax at each band. The example uses generic thresholds $12,500 / $50,000 / $125,000 with rates 0% / 20% / 40% / 45% — swap these for your country's brackets (US federal, UK PAYE, Indian slabs, etc.).
- 3For a more flexible approach, build a brackets table (columns: Upper Limit, Rate, Cumulative Tax at start of band) and use SUMPRODUCT — works for any number of bands without changing the formula.
- 4Always verify against your jurisdiction's current tax tables — rates change annually.
Tips
- For maintainability, build the tax brackets in a reference table and use a SUMPRODUCT formula: it handles any number of bands without changing the formula structure.
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Frequently asked
How do I adapt this for a different country's tax bands?
Replace the threshold and rate values with your jurisdiction's current brackets. The nested IF structure stays the same; only the numbers change.
Can I calculate effective tax rate from this?
Yes — divide the tax by income: =B2/A2 and format as Percentage.
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