tax brackets

What Are the Income Tax Brackets for 2021 vs. 2020?

There are seven different federal income tax brackets for your 2021 tax return – each with its own marginal tax rate. Which bracket you end up in for 2021 depends on your taxable income.

Smart taxpayers are planning ahead and already thinking about their next federal income tax return. For most Americans, that's their return for the 2021 tax year — which will be due on April 18, 2022 (April 19 for residents of Maine and Massachusetts). Effective tax planning also requires an understanding of what's new or changed from the previous tax year. When it comes to federal income tax rates and brackets, the tax rates themselves didn't change from 2020 to 2021. There are still seven tax rates in effect for the 2021 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. However, as they are every year, the 2021 tax brackets were adjusted to account for inflation. That means you could wind up in a different tax bracket when you file your 2021 return than the bracket you were in for 2020 – which also means you could be subject to a different tax rate on some of your 2021 income, too.

The 2021 and 2020 tax bracket ranges also differ depending on your filing status. For example, the 22% tax bracket for the 2021 tax year goes from $40,526 to $86,375 for single taxpayers, but it starts at $54,201 and ends at $86,350 for head-of-household filers. (For 2020, the 22% tax bracket for singles went from $40,126 to $85,525, while the same rate applied to head-of-household filers with taxable income from $53,701 to $85,500.)

So, now that you're focused on your 2021 taxes, here are the tax brackets you'll use when you file your tax return next year:

2021 Tax Brackets for Single Filers and Married Couples Filing Jointly

Tax Rate

Taxable Income
(Single)

Taxable Income
(Married Filing Jointly)

10%

Up to $9,950

Up to $19,900

12%

$9,951 to $40,525

$19,901 to $81,050

22%

$40,526 to $86,375

$81,051 to $172,750

24%

$86,376 to $164,925

$172,751 to $329,850

32%

$164,926 to $209,425

$329,851 to $418,850

35%

$209,426 to $523,600

$418,851 to $628,300

37%

Over $523,600

Over $628,300

--

2021 Tax Brackets for Married Couples Filing Separately and Head-of-Household Filers

Tax Rate

Taxable Income
(Married Filing Separately)

Taxable Income
(Head of Household)

10%

Up to $9,950

Up to $14,200

12%

$9,951 to $40,525

$14,201 to $54,200

22%

$40,526 to $86,375

$54,201 to $86,350

24%

$86,376 to $164,925

$86,351 to $164,900

32%

$164,926 to $209,425

$164,901 to $209,400

35%

$209,426 to $314,150

$209,401 to $523,600

37%

Over $314,150

Over $523,600

For comparison, here are the 2020 tax brackets:

2020 Tax Brackets for Single Filers and Married Couples Filing Jointly

Tax Rate

Taxable Income
(Single)

Taxable Income
(Married Filing Jointly)

10%

Up to $9,875

Up to $19,750

12%

$9,876 to $40,125

$19,751 to $80,250

22%

$40,126 to $85,525

$80,251 to $171,050

24%

$85,526 to $163,300

$171,051 to $326,600

32%

$163,301 to $207,350

$326,601 to $414,700

35%

$207,351 to $518,400

$414,701 to $622,050

37%

Over $518,400

Over $622,050

--

2020 Tax Brackets for Married Couples Filing Separately and Head-of-Household Filers

Tax Rate

Taxable Income
(Married Filing Separately)

Taxable Income
(Head of Household)

10%

Up to $9,875

Up to $14,100

12%

$9,876 to $40,125

$14,101 to $53,700

22%

$40,126 to $85,525

$53,701 to $85,500

24%

$85,526 to $163,300

$85,501 to $163,300

32%

$163,301 to $207,350

$163,301 to $207,350

35%

$207,351 to $311,025

$207,351 to $518,400

37%

Over $311,025

Over $518,400

How the Tax Brackets Work

Suppose you're single and have $90,000 of taxable income in 2021. Since $90,000 is in the 24% bracket for singles, would your tax bill simply be a flat 24% of $90,000 – or $21,600? No! Your tax would actually be less than that amount. That's because, using marginal tax rates, only a portion of your income would be taxed at the 24% rate. The rest of it would be taxed at the 10%, 12%, and 22% rates.

Here's how it works. Again, assuming you're single with $90,000 taxable income in 2021, the first $9,950 of your income is taxed at the 10% rate for $995 of tax. The next $30,575 of income (the amount from $9,951 to $40,525) is taxed at the 12% rate for an additional $3,669 of tax. After that, the next $45,850 of your income (from $40,526 to $86,375) is taxed at the 22% rate for $10,087 of tax. That leaves only $3,625 of your taxable income (the amount over $86,375) to be taxed at the 24% rate, which comes to an addition $870 of tax. When you add it all up, your total 2021 tax is only $15,621. (That's $5,979 less than if a flat 24% rate was applied to the entire $90,000.)

Now, suppose you're a millionaire (we can all dream, right?). If you're single, only your 2021 income over $523,600 is going to be taxed at the top rate (37%). The rest will be taxed at lower rates as described above. So, for example, the tax on $1 million for a single person in 2021 is $334,072. That's a lot of money, but it's still $35,928 less than if the 37% rate were applied as a flat rate on the entire $1 million (which would result in a $370,000 tax bill).

The Marriage Penalty

The difference between bracket ranges sometimes creates a "marriage penalty." This tax-law twist makes certain married couples filing a joint return pay more tax than they would if they were single (typically, where the spouses' incomes are similar). The penalty is triggered when, for any given rate, the minimum taxable income for the joint filers' tax bracket is less than twice the minimum amount for the single filers' bracket.

Before the 2017 tax reform law, this happened in the four highest tax brackets. But now, as you can see in the tables above, only the top tax bracket contains the marriage penalty trap. As a result, only couples with a combined taxable income over $628,300 are at risk when filing their 2021 federal tax return. For 2020 returns, the marriage penalty was possible only for married couples with a combined taxable income above $622,050. (Note that the tax brackets for your state's income tax could contain a marriage penalty.)

Will the Top Tax Rate Be Raised?

Will the top income tax rate go up in the near future? It will if President Biden gets his way. As part of his American Families Plan, the president has proposed increasing the highest tax rate from 37% to 39.6%, which is where it was before the Tax Cuts and Jobs Act of 2017. The 39.6% rate would apply to single filers with taxable income over $452,700 and joint filers with taxable income exceeding $509,300. (Note that the marriage penalty would still exist for the top bracket under the president's proposal.)

There's also a separate proposal coming out of the House Ways and Means Committee that would also raise the top rate to 39.6%. Under this plan, the 39.6% rate would apply to single filers with more than $400,000 of taxable income and married couples filing a joint return with over $450,000 of taxable income. (As with the president's plan, the marriage penalty remains for the wealthiest Americans under the House proposal.) The House plan would also tack on an additional 3% surtax if for anyone with a modified adjusted gross income over $5 million, which would effectively push the tax rate up to 42.6% for the wealthiest Americans.

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