Woman working to file her taxes.

2020-2021 Federal Income Tax Brackets And Tax Rates

Andrew Dehan7-minute read
February 16, 2021

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As we settle into 2021, it’s time to deal with last year’s individual income taxes. Getting your taxes done is critical. The typical individual income tax filing deadline is April 15. Barring any unforeseen national circumstances, you will need to file your taxes by then.

Before you can get started, understand where your income falls in the tax brackets and how these brackets work. There are seven federal tax brackets that determine how much you pay in federal income tax.

If you aren’t sure where you stand, it can be confusing to work on your taxes. We’ll cover what the tax brackets are, how to determine which bracket you fall into and explain what this means for your income taxes.

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How Do Tax Brackets Work?

In the United States, the tax code is based on a progressive system. Different portions of your income are taxed at various rates. As you earn more income, parts of your higher earned income will be taxed at a higher rate. This leads to people who earn a higher income paying more in taxes. However, every taxpayer pays equal taxes on each portion of their taxable income.

Currently, there are seven federal tax brackets that have tax rates of 10, 12, 22, 24, 32, 35, and 37%. The Tax Cuts and Jobs Act of 2017 did make some reductions to income tax rates that effectively lower the amount individuals will pay in taxes. Prior to this legislation, the 2018 tax brackets were slightly higher at 10, 15, 25, 28, 33, 35, and 39.6%. 

Your income will fall into federal tax brackets that are based on two factors: your taxable income and your filing status. The taxable income part is easy to determine. This is the money that you have earned minus any tax cuts or deductions. 

The second piece of the puzzle is your filing status. There are four different filing statuses that you can choose, according to the IRS: single, married filing jointly, married filing separately, and head of household. You can determine your status of married or single based on the last day of the tax year.

For example, if you got married on December 31, 2020, you would be able to file as married for tax purposes. However, if you got married on January 1, 2021, you cannot file with a married status when you turn in your 2021 income taxes in April 2022. 

Once you determine your tax bracket, then you can find out how much you owe in taxes to the IRS. As you work through your taxes, it’s important to remember that your taxable income will likely be taxed at several different rates. 

Let’s put this into practice!

Example tax bracket graphic.

For example, let’s say you’re single and you earned $35,000 worth of taxable income. That would put you in the 12% federal income tax bracket. However, that doesn’t mean that you’ll pay 12% in taxes for all your income.

You would pay 10% on your income up to $9,875. That’s $987.50. Next, you would pay 12% on the remaining $25,125 of your income, which is $3,015. Without considering any deductions, credits or other taxes and fees, this puts your total federal income tax at $4,002.50. If you paid a straight 12%, you’d pay around $200 more.

The differences get bigger as your income goes up. Let’s say you’re filing single with an income of $70,000. That would put you in the 22% tax bracket. Again, you would not pay 22% on your entire taxable income. Instead, you would pay 10% on your income up to $9,875, 12% on income between $9,876 – $40,125 and 22% on the remaining income of $29,875.

Again, without considering deductions, credits or other taxes and fees, this puts your total federal income tax for the year at $8,247.26. If you were to pay a straight 22% on $70,000, you’d be paying $15,400, or over $7,000 more.

Example tax bracket graphic.

Once again, these numbers only represent your federal income tax rate. The total amount you pay in taxes might be higher depending on your state, county and/or city. You will also be required to pay the FICA tax aka Social Security and Medicare.

This also does not contain any deductions or tax credits you may qualify for, so the amount of federal income tax you pay may be lower with those factored in.

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2020 Federal Income Tax Brackets

For Taxes Filed In April 2021

As you collect your earning statement for 2020’s income tax, look at the tax brackets for this tax year. Check them out below.

 

Tax Rate

Single

Married Filing Joint

Head of Household

10%

$0 – $9,875

$0 – $19,750

$0 – $14,100

12%

$9,876 – $40,125

$19,751 – $80,250

$14,101 – $53,700

22%

$40,126 – $84,525

$80,251 – $171,050

$53,701 – $85,500

24%

$85,526 – $163,300

$171,051 – $326,600

$85,501 – $163,300

32%

$163,301 – $207,350

$326,601 – $414,700

$163,301 – $207,350

35%

$207,351 – $518,400

$414,701 – $622,050

$207,351 – $518,400

37%

$518,401 and higher

$622,051 and higher

$518,401 and higher

 

These are the federal tax rates for 2019. If you are married and choose to file separately, then you would follow the bracket guidelines of single filers.

2019 Federal Income Tax Brackets

For Taxes Filed In April 2020

Let’s take a closer look at the 2019 tax brackets.

 

Tax Rate

Single

Married Filing Joint

Head of Household

10%

$0 – $9,700

$0 – $19,400

$0 – $13,850

12%

$9,701 – $39,475

$19,401 – $78,950

$13,851 – $52,850

22%

$39,476 – $84,200

$78,950 – $168,400

$52,851 – $84,200

24%

$84,201 – $160,725

$168,401 – $321,450

$84,201 – $160,700

32%

$160,726 – $204,100

$321,451 – $408,200

$160,701 – $204,101

35%

$204,101 – $510,300

$408,201 – $612,350

$204,101 – $510,300

37%

$510,301 and higher

$612,351 and higher

$510,301 and higher

 

These are the federal tax rates for 2019. If you are married and choose to file separately, you would follow the bracket guidelines of single filers.

2018 Federal Income Tax Brackets

For Taxes Filed In April 2019

If you are interested to see how this year’s tax brackets compare to the US tax brackets of 2018, then check out the chart below.

 

Tax Rate

Single

Married Filing Joint

Head of Household

10%

$0 – $9,525

$0 – $19,050

$0 – $13,600

12%

$9,526 – $38,700

$19,051 – $77,400

$13,601 – $51,800

22%

$38,701 – $82,500

$77,401 – $165,000

$51,801 – $82,500

24%

$82,501 – $157,500

$165,001 – $315,000

$82,501 – $157,500

32%

$157,501 – $200,000

$315,001 – $400,000

$157,501 – $200,000

35%

$200,001 – $500,000

$400,001 – $600,000

$200,001 – $500,000

37%

$500,000 and higher

$600,001 and higher

$500,001 and higher

 

Although there are not too many major changes, you’ll notice that the tax brackets adjust to compensate for increasing inflation each year.

How To Get Into A Lower Federal Income Tax Bracket

Now that you know which tax bracket you fall into, you might be worried about your tax bill. It’s possible to move into a lower tax bracket using two different tax strategies. If you’re able to move into a lower tax bracket, then you may stand to gain hundreds of dollars on your yearly tax bill. 

If you’re interested in pursuing one of these options, consider talking to a tax professional. They will be able to dive into more details and determine whether one of these options is a good fit for your situation.

Tax Deductions

If you qualify for any tax deductions, it makes sense to include these in your tax calculations.

The standard deduction is what anyone can take if they do not want to itemize, or list out, all of their deductions. Most people choose to take the standard deduction, which we cover below. 

The standard deduction for 2020 is:

  • $12,400 for single filers and married filers filing separately
  • $24,800 for married people filing joint
  • $18,650 for any heads of household

It may make sense to take the standard deduction. But if you have tax deductions that will surpass the standard deduction, it’s worth the effort. You may even be able to lower your income to qualify for a lower tax bracket. 

A few examples of tax deductions that you might want to itemize include:

If you have more itemizable deductions than the standard deduction, it makes sense to itemize your deductions.

You should talk to a tax professional to assess your situation before pursuing this option. 

Tax Credits

Tax credits are a second way to lower your total tax bill if you qualify for one. In this case, you would not reduce your total taxable income or affect your tax bracket but you can use these credits to offset any taxes that you owe.

For example, if you owed $10,000 in taxes but qualified for a $3,000 tax credit then you would only be responsible for paying $7,000 of your tax bill.

There are many different types of tax credits. A few common ones include:

  • Child tax credit
  • Earned income tax credit
  • Child and dependent care tax credit
  • Saver’s credit aka retirement contribution savings credit
  • Lifetime learning tax credit

This is not an exhaustive list. You should talk to a tax professional to determine what tax credits you may qualify for. 

Final Thoughts On Federal Income Tax Brackets

As you file your taxes for your 2020 income, take a minute to determine your tax bracket with your income and filing status. This will give you a better idea of what you should expect to pay at tax time. The IRS will reassess the tax brackets each year, so never assume that your tax liabilities will remain the same year after year.

If you’re earning more money this year, you should expect to pay more in taxes. Since the federal income tax is progressive, your entire income will not be taxed at the same rate.

However, the more you earn, the more you’ll be required to pay in income taxes. 

Consult with a tax professional to determine if you’re eligible for tax credits or if you should itemize your deductions to reduce your tax bill.

Want to become more financially literate? Check out the Rocket HQSM Financial Learning Center.

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Andrew Dehan

Andrew Dehan is a professional writer who writes about real estate and homeownership. He is also a published poet, musician and nature-lover. He lives in metro Detroit with his wife, daughter and dogs.