2021-2022 Tax Bands and Federal Income Tax Rates
 |
| At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity this article may contain references to our partners' products. Here's an explanation of how we make money. |
Most ordinary income for tax year 2021 has seven tax brackets: 10% 12% 22% 24% 32% 35% and 37%.
Your tax bracket depends on your taxable income and your filing status: single married filing jointly or eligible widow (widow) married filing separately and head of household. Generally when you raise your salary grade you also raise your tax grade.
| TAX RATE | SINGLE | HEAD OF HOUSEHOLD | MARRIED FILING JOINTLY OR QUALIFYING WIDOW | MARRIED FILING SEPARATELY |
|---|---|---|---|---|
| Source: IRS | ||||
| 10% | $0 to $9,950 | $0 to $14,200 | $0 to $19,900 | $0 to $9,950 |
| 12% | $9,951 to $40,525 | $14,201 to $54,200 | $19,901 to $81,050 | $9,951 to $40,525 |
| 22% | $40,526 to $86,375 | $54,201 to $86,350 | $81,051 to $172,750 | $40,526 to $86,375 |
| 24% | $86,376 to $164,925 | $86,351 to $164,900 | $172,751 to $329,850 | $86,376 to $164,925 |
| 32% | $164,926 to $209,425 | $164,901 to $209,400 | $329,851 to $418,850 | $164,926 to $209,425 |
| 35% | $209,426 to $523,600 | $209,401 to $523,600 | $418,851 to $628,300 | $209,426 to $314,150 |
| 37% | $523,600 or more | $523,600 or more | $628,300 or more | $314,151 or more |
The IRS began accepting taxpayer returns for this year's tax season in January. Most Americans have until April 18 to file although they can apply for a six-month extension until October 17.
The IRS announced new tax brackets for tax year 2022 on November 10 that apply to taxes you will file in April 2023 or October 2023 (if you file an extension). There are seven tax brackets for most ordinary income for tax year 2022: 10% 12% 22% 24% 32% 35% and 37%。”
Learn about other changes this year's tax season that could affect your filing in our new video series.
| TAX RATE | SINGLE | HEAD OF HOUSEHOLD | MARRIED FILING JOINTLY OR QUALIFYING WIDOW | MARRIED FILING SEPARATELY |
|---|---|---|---|---|
| Source: IRS | ||||
| 10% | $0 to $10,275 | $0 to $14,650 | $0 to $20,550 | $0 to $10,275 |
| 12% | $10,276 to $41,775 | $14,651 to $55,900 | $20,551 to $83,550 | $10,276 to $41,775 |
| 22% | $41,776 to $89,075 | $55,901 to $89,050 | $83,551 to $178,150 | $41,776 to $89,075 |
| 24% | $89,076 to $170,050 | $89,051 to $170,050 | $178,151 to $340,100 | $89,076 to $170,050 |
| 32% | $170,051 to $215,950 | $170,051 to $215,950 | $340,101 to $431,900 | $170,051 to $215,950 |
| 35% | $215,951 to $539,900 | $215,951 to $539,900 | $431,901 to $647,850 | $215,951 to $323,925 |
| 37% | $539,901 or more | $539,901 or more | $647,851 or more | $323,926 or more |
How federal tax brackets work
Tax brackets are not as intuitive as they seem as most taxpayers have to look at multiple tax brackets to know their effective tax rate.
Rather than seeing which tax bracket you fall into based on your income determine your overlapping personal tax brackets based on your gross income.
Figuring that out is easier in practice:Example 1: Let's say you are a single person and your taxable income for tax year 2021 is $40,000. Technically you'll stay within the 12% tax bracket but your income won't be fully taxed at 12%. Instead you will follow the tax bracket Pay 10% on the first $9,950 of your income then 12% on the next portion of your income between $9,951 and $40,525. Because your income does not exceed $40,525 your income will not be affected by the 22%.
This usually means that Americans are being charged a lower rate than their individual federal income tax bracket which is their effective tax rate.Example 2: Say you are single in 2021 with a taxable income of $70,000. You will pay 10% on the first $9950 ($995) of income; then 12% on the partial income from $9951 to $40525 ($3669) then 22% on the remaining income ($6484.50)
Your total tax bill is $11148.50 Divide that by your $70,000 income and you'll get an effective tax rate of about 16% which is lower than the 22% range you're in.
The brackets above show the 2021 and 2022 tax rates. Brackets are adjusted annually for inflation.
Marginal tax rate definition and example
Another way to describe the US tax system is to say that most Americans are charged marginal tax rates. That's because as income increases it is taxed at a higher rate. In other words Americans are taxed more on their last dollar earned than on their first dollar. This is called Progressive tax system.
The technical definition of marginal tax rate is the tax rate each taxpayer pays on their additional income.
How to get into the lower tax brackets Americans have two main ways to get into the lower tax brackets: tax credits and tax deductions. A tax credit is a dollar-for-dollar reduction in your income tax bill. If you have a $2,000 tax bill but qualify for a $500 tax credit your tax bill will drop to $1,500. Tax Credits can save you more tax than deductions and Americans can qualify for a variety of different credits. The federal government provides a tax credit for the cost of your solar panel purchase and offsets the cost of adopting a child. Americans can also use the education tax credit Childcare and dependent expense credits and tax credits for having children among others. Many states also offer tax credits. While tax credits reduce your actual tax bill tax deductions reduce the amount of your taxable income. If you have enough deductions over The standard deduction for your tax filing status which you can itemize to reduce your taxable income. For example if your medical expenses exceed 7.5% of your adjusted gross income in 2021 you can claim those expenses and reduce your taxable income.
Tax brackets from previous years:
- 2020 tax brackets Tax rate
- 2019 tax rate
- 2018 tax rate
- 2017 tax rate
- 2016 tax rate
- 2015 tax rate
- 2014 tax rate
- 2013 tax rate
- 2012 tax rate
- 2011 tax rate
- 2010 tax rate
Essential tax reading:
Comments
Post a Comment