Tax Bracket Information For The 2021 Tax Year

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The Internal Revenue Service determines how much each person gets taxed based on their total taxable income for the tax year. Earning a higher income means you will be paying a higher tax rate.

The tax brackets for tax year 2021 are explained below to help you understand what you might be paying this season.

Federal Income Tax Rate Table

Although your taxable income plays a leading role in determining your tax rate, your filing status will also affect which bracket you will fall into. The four most used filing statuses are individuals unmarried, married individuals filing jointly, heads of households, and married individuals filing separately. The tax brackets for these four filing options are outlined in the table below:

Tax Rate Unmarried Individual Married Filing Jointly and Surviving Spouses Married Filing Separately Head of Household
10% $0 – $9,950 $0 – $19,900 $0 – $9,950 $0 – $14,200
12% $9,951 – $40,525 $19,901 – $81,050 $9,951 – $40,525 $14,201 – $54,200
22% $40,526 – $86,375 $81,051 – $172,750 $40,526 – $86,375 $54,201 – $86,350
24% $86,376 – $164,925 $172,751 – $329,850 $86,376 – $164,925 $86,351 – $164,900
32% $164,926 – $209,425 $329,851 – $418,850 $164,926 – $209,425 $164,901 – $209,400
35% $209,426 – $523,600 $418,851 – $628,300 $209,426 – $314,150 $209,401 – $523,600
37% $523,600+ $628,300+ $314,150+ $523,600+

How are tax brackets used?

As we’ve already discussed, your tax bracket is determined by your filing status and your total taxable income. Taxable income is the entire amount of money you have earned minus all adjustments and tax deductions you qualify for. (Remote Books Online has a Big List of Small Business Tax Deductions to help understand what you may be eligible for.)

After you have determined your taxable income amount, you would use the IRS’s tax rate tables, similar to the table above to determine your tax rates. Note, the brackets listed above are for income tax only, capital gains have separate tax brackets.

Most people fall into multiple tax brackets, which is where it can get a little confusing. Let’s look at an example, imagine you are filing as an unmarried individual and your taxable income totaled $35,000.

Tax Rate Unmarried Individual’s Total Taxable Income
10% $0 – $9,950
12% $9,951 – $40,525
22% $40,526 – $86,375
24% $86,376 – $164,925
32% $164,926 – $209,425
35% $209,426 – $523,600
37% $523,600+

If we look at the 2022 tax brackets for unmarried individual filers, we can see $35,000 falls in the 12% tax rate. This does not mean you will pay 12% on the entire $35,000 though. You would actually pay two different tax rates in this example.

You would pay 10% on the first $9,950, and 12% on the remaining $25,050 (35,000 minus 9,950).

If we were to finish doing the math to determine your tax bill it would look like this:

Amount Due = (10% x $9,950) + (12% x $25,050)
Amount Due = $995 + $3,006
Amount Due = $4,001

Marginal Tax Rate is the highest tax rate you pay, so in this above example, it would be 12%.

Calculating Your Taxes Owed

When it comes to the math involved in figuring out how much taxes you owe, it can be daunting, especially with numerous tax rates to consider. There are helpful tables that we will go over here, for each filing status, that do some of the calculations for you.

Unmarried Individuals

To qualify for this filing status, you will have to have been unmarried or legally separated from your spouse on December 31, 2021.

Taxable Income: The Tax Is:
$0 – $9,950 10% of the taxable income
$9,951 – $40,525 $995 plus 12% of the income over $9,950
$40,526 – $86,375 $4,664 plus 22% of the income over $40,525
$86,376 – $164,925 $14,751 plus 24% of the income over $86,375
$164,926 – $209,425 $33,603 plus 32% of the income over $164,925
$209,426 – $523,600 $47,843 plus 35% of the income over $209,425
$523,600 $157,804.25 plus 37% of the income over $523,600

Married Filing Jointly and Surviving Spouses

To file as this status, you must be married on December 31, 2021, and both you and your spouse agree to file jointly, or be a qualifying surviving spouse.

Taxable Income: The Tax Is:
$0 – $19,900 10% of the taxable income
$19,901 – $81,050 $1,990 plus 12% of the income over $19,900
$81,051 – $172,750 $9,328 plus 22% of the income over $81,050
$172,751 – $329,850 $29,502 plus 24% of the income over $172,750
$329,851 – $418,850 $67,206 plus 32% of the income over $329,850
$418,851 – $628,300 $95,686 plus 35% of the income over $418,850
$628,300+ $168,993.50 plus 37% of the income over $628,300

Married Filing Separately

You can file using this status if you and your spouse do not agree to file jointly, or if it would lower your tax bill to file separately.

Taxable Income: The Tax Is:
$0 – $9,950 10% of the taxable income
$9,951 – $40,525 $995 plus 12% of the income over $9,950
$40,526 – $86,375 $4,664 plus 22% of the income over $40,525
$86,376 – $164,925 $14,751 plus 24% of the income over $86,375
$164,926 – $209,425 $33,603 plus 32% of the income over $164,925
$209,426 – $314,150 $47,843 plus 35% of the income over $209,425
$314,150+ $84,496.75 plus 37% of the income over $314,150

Head of Household

If these three requirements are met, you may be able to apply as Head of Household:

  • You are unmarried on the last day of the year.
  • You paid more than half the cost of keeping up a home for the year.
  • A qualifying person lived with you in the home for more than half the year.
Taxable Income: The Tax Is:
$0 – $14,200 10% of the taxable income
$14,201 – $54,200 $1,420 plus 12% of the income over $14,200
$54,201 – $86,350 $6,220 plus 22% of the income over $54,200
$86,351 – $164,900 $13,293 plus 24% of the income over $86,350
$164,901 – $209,400 $32,145 plus 32% of the income over $164,900
$209,401 – $523,600 $46,385 plus 35% of the income over $209,400
$523,600+ $156,355 plus 37% of the income over $523,600

Why are tax brackets adjusted yearly?

Every year tax brackets are updated, and changes are made due to inflation. The IRS attempts to prevent you from being pushed into a higher tax bracket by adjusting the brackets as inflation occurs.

What other tax elements are affected by inflation?

In this article, we’ve gone over what taxable income is, which is your total revenue minus deductions. There are also certain adjustments and credits that can also lower your tax burden. The IRS adjusts some of these, along with tax brackets, to help prevent you from being forced into the next bracket.

The Standard Deduction

The standard deduction is a specific amount subtracted from your income to lower your taxable income. This gets adjusted every year as well to keep pace with inflation. These are the 2021 tax year standard deduction amounts and how much they have increased from last year.

  • Unmarried Individuals – $12,550 for (up $150)
  • Married Filing Separately – $12,550 (up $150)
  • Heads of Household – $18,800 for (up $150)
  • Married Filing Jointly and Surviving Spouses – $25,100 (up $300)

Adjustments

Adjustments to a taxpayer’s income establish their adjusted gross income. These adjustments, such as certain expenses, payments, and fees, are subtracted from your income, even before the standard deduction is applied. Some examples of adjustments include educator expenses, charitable contributions, and student loan interest. The IRS website has the full list of possible adjustments.

Tax Credits

Tax credits are a little different from deductions. Deductions reduce the amount of taxable income you have. Tax credits, on the other hand, decrease the amount of taxes owed. Here are some credits that are affected by inflation:

Earned Income Credit – The maximum amount you could receive for the Earned Income Credit is $6,728 for tax year 2021, depending on your income and number of qualifying children. This is $68 higher than last year’s maximum amount.

Adoption Credit – The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $14,440. This is up $140 from last year.

Lifetime Learning Credit – This credit is worth up to $2,000 per tax return. Once an individual filers adjusted gross income reaches $59,000 ($119,000 for joint filers), a reduction in that credit begins to occur.

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