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How to calculate income tax in Excel?

Author: Kelly Last Modified: 2020-04-21

In some regions, the income tax will be taken out from your incomes (salary) by your company accountants, while in some regions it requires to calculate and declare the income tax by yourself. How to figure out your income tax? There are several solutions in Excel.


Calculate income tax in Excel

Supposing you have got the tax table in the Range A5:C12 as below screenshot shown, and your income is placed in the Cell C1. Now you can calculate your income tax as follows:

1. Add a Differential column right to the tax table. In the Cell D6 type 10%, in the Cell D7 type the formula =C7-C6, and then drag the AutoFill Handle to the whole Differential column. See screenshot:

2. Add an Amount column right to the new tax table. In the Cell E6 type the formula =$C$1-A6 ($C$1 is the cell with your income), and then drag the AutoFill Handle to the whole Amount column. See screenshot:

3. Add a Tax column right to the new tax table. In the Cell F6 type the formula =E6*D6, and then drag the AutoFill Handle until negative results appear. See screenshot:

4. Click into the cell you will place the income tax at, and sum all positive numbers in the Tax column with the formula =SUM(F6:F8). See screenshot:

So far you have figured out the income tax of the specified income already.

Quickly match the taxable income with tax rate by an amazing tool

In many countries and regions, the income tax rate varies depend on your income. Here, I will introduce the Lookup between Two Values feature to help you quickly match the tax rate and cumulative tax with one or multiple incomes with an Excel formula.


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Calculate income tax with SUMPRODUCT function in Excel

Actually, you can apply the SUMPRODUCT function to quickly figure out the income tax for a certain income in Excel. Please do as follows.

1. In the tax table, right click the first data row and select Insert from the context menu to add a blank row. See screenshot:

2. Select the cell you will place the calculated result at, enter the formula =SUMPRODUCT(C6:C12-C5:C11,C1-A6:A12,N(C1>A6:A12)), and press the Enter key. See screenshot:

Note: In the above formula, C6:C12-C5:C11 figures out the differential rates, C1 is the specified income, C1-A6:A12 calculates the amount to each differential rate, and you can change them as you need.


Calculate income tax with Vlookup function in Excel

Frequently, you can get the tax table with cumulative tax for each tax bracket. In this condition, you can apply the Vlookup function to calculate the income tax for a certain income in Excel.

Select the cell you will place the calculated result at, enter the formula =VLOOKUP(C1,A5:D12,4,TRUE)+(C1-VLOOKUP(C1,A5:D12,1,TRUE))*VLOOKUP(C1,A5:D12,3,TRUE) into it, and press the Enter key. See screenshot:

Note: In above formula, C1 is the specified income, A5:D12 is the tax table, and you can change them as you need.


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Comments (5)
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This comment was minimized by the moderator on the site
This is great, thank you. You could use a SUMIF to ignore negative rows in your tax column too.
This comment was minimized by the moderator on the site
Your computation Tax is incorrect. It's the tax rate times the amount of income in the band.
This comment was minimized by the moderator on the site
Correct, specifically I'm referring to the vlookup calculation. It needs to use the next higher bracket for the remaining income beyond the vlookup income value.
This comment was minimized by the moderator on the site
Why you have not provided Excel sheet for rough calculation for individuals ? Please provide it for self calculation.
This comment was minimized by the moderator on the site
Merci beucoup Docteur Excel, les 2 formules m'ont aidé. Courage.
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