Tax Rates

Knowing what your tax rates are makes estimating your taxes much easier.  Starting in 2018, the Tax Cuts and Jobs Act (TCJA), created seven tax brackets on which to base a taxpayer's income tax.

The United States tax system is based on two main principles. First, it is a progressive tax system, which increases tax liability in line with increasing income. Basically, the more you make, the more you will pay.

Secondly, our tax system is a marginal one. That means that the tax rate is only based on the last dollar. Your tax increases or decreases based on changes in the last dollar. For example in 2019, you are single and prepare your tax return You have taxable income of $165,000.   Looking at the 2019 chart for single filers, $145,000 falls within the 24% bracket. This does not mean your entire $145,000 is taxed at 24%.

Your first $9,700 is taxed at 10% or $970. Only the amount between $9,701 and $39,475, or $29,775 is taxed at 12%, or  $3,573. The next $44,725 ($84,200 less $39,475) is taxed at 22%, or $9,840. Everything above $84,201 up to the $145,000 ($60,800), is taxed at 24% or $14,592. 

Adding $970 (10%), $3,573 (12%), $9,840 (22%), and $14,592 (24%) together, gives you a final income tax bill (before other taxes and credits) of $28,975. This $28,975 may be increased by other taxes such as self-employment and additional Medicare taxes, or reduced by credits like the Child Tax Credit or American Opportunity Credit.

For every dollar up or down from the taxable income of $145,000, the tax will go up or down respectively by 24 cents. By knowing these tables, which adjust slightly for inflation each year, you can be better prepared in planning your tax situation and budgeting for the result.

2020 Tax Brackets
                             Single Filers        Married Couples Filing Jointly                 Head of Household
10%                      Up to $9,700                    Up to $19,400                                         Up to $9,700            12%                 $9,701 to $39,475          $19,401 to $78,950                              $13,851 to $52,850        22%             $39,476 to $84,200        $78,951 to $168,400                            $52,851 to $84,200        24%            $84,201 to $160,725       $168,401 to $321,450                          $84,201 to $160,700      32%           $160,726 to $204,100      $321,451 to $408,200                         $160,701 to $204,100      35%           $204,101 to $510,300     $408,201 to $612,350                         $204,101 to $510,300      37%                 Over $510,300                  Over $612,350                                         Over $510,300

2021 Tax Brackets
                          Single Filers          Married Couples Filing Jointly                 Head of Household          10%                  Up to $9,875                       Up to $19,750                                        Up to $14,100              12%               $9,876 to $40,125            $19,751 to $80,250                             $14,101 to $53,700        22%            $40,126 to $85,525           $80,251 to $171,050                          $53,701 to $85,500      24%          $85,526 to $163,300         $171,051 to $326,600                       $85,501 to $163,300        32%         $163,301 to $207,350        $326,601 to $414,700                      $163,301 to $207,350      35%         $207,351 to $518,400        $414,701 to $622,050                      $207,351 to $518,400        37%                Over $518,400                    Over $622,050                                    Over $518,400

2022 Tax Brackets

                     Single Filers            Married Couples Filing Jointly                Head of Household      10%             Up to $9,875                        Up to $19,750                                       Up to $14,100            12%         $9,876 to $40,125              $19,751 to $80,250                           $14,101 to $53,700        22%      $40,126 to $85,525           $80,251 to $171,050                         $53,701 to $85,500        24%    $85,526 to $163,300         $171,051 to $326,600                       $85,501 to $163,300        32%   $163,301 to $207,350        $326,601 to $414,700                      $163,301 to $207,350      35%   $207,351 to $518,400         $414,701 to $622,050                     $207,351 to $518,400        37%          Over $518,400                   Over $622,050                                      Over $518,400

Keith E. Johnson CPA PA

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