What is my tax class? 2020-2021 Federal Tax Brackets – Forbes Advisor

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Surprises can be fun, but not when it comes to an unexpected tax burden.

The IRS has created tax brackets so that people can estimate how much tax they will have to pay each year. In general, as your income increases, so does the amount of tax you pay.

Here you will find the tax brackets for the 2020 and 2021 tax years as well as information on how to calculate which tax brackets you fall into.

The 2020 income tax brackets

There are seven federal tax brackets for the 2020 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your registration status and your taxable income (e.g. your wages) determine which category you are in.

Tax classes and tax rates, 2020
rating For unmarried people For married people filing joint returns Married filing separately For heads of household
10% $ 0 to $ 9,875 $ 0 to $ 19,750 $ 0 to $ 9,875 $ 0 to $ 14,100
12% $ 9,876 to $ 40,125 $ 19,751 to $ 80,250 $ 9,876 to $ 40,125 $ 14,101 to $ 53,700
22% $ 40,126 to $ 85,525 $ 80,251 to $ 171,050 $ 40,126 to $ 85,525 $ 53,701- $ 85,500
24% $ 85,526 to $ 163,300 $ 171,051 to $ 326,600 $ 85,526 to $ 163,300 $ 85,501 to $ 163,300
32% $ 163,301 to $ 207,350 $ 326,601 to 414,701 $ 163,301 to $ 207,350 $ 163,301 to $ 207,350
35% $ 207,351 to $ 518,400 $ 414,701 to $ 622,050 $ 207,351 to $ 311,025 $ 207,351 to $ 518,400
37% $ 518,401 or more $ 622,051 or more $ 311,026 or more $ 518,401 or more

2021 income tax brackets

Tax brackets and tax rates, 2021
rating For unmarried people For married people filing joint returns Married filing separately For heads of household
10% $ 0 to $ 9,950 $ 0 to $ 19,900 $ 0 to $ 9,950 $ 0 to $ 14,200
12% $ 9,951 to $ 40,525 $ 19,901 to $ 81,050 $ 9,951 to $ 40,525 $ 14,201 to $ 54,200
22% $ 40,526 to $ 86,375 $ 81,051 to $ 172,750 $ 40,526 to $ 86,375 $ 54,201 to $ 86,350
24% $ 86,376 to $ 164,925 $ 172,751 to $ 329,850 $ 86,376 to $ 164,925 $ 86,351 to $ 164,900
32% $ 164,926 to $ 209,425 $ 329,851 to $ 418,850 $ 164,926 to $ 209,425 $ 164,901 to $ 209,400
35% $ 209,426 to $ 523,600 $ 418,851 to $ 628,300 $ 209,426 to $ 314,150 $ 209,401 to $ 523,600
37% $ 523,601 or more $ 628,301 or more $ 314,151 or more $ 523,601 or more

What are tax brackets?

Tax brackets were created by the IRS to help determine how much money you would need to pay the IRS annually.

The amount you pay in taxes depends on your income. As your taxable income increases, the taxes you pay increase.

However, figuring out your tax liability isn’t as simple as comparing your salary with the parentheses shown above.

The tax system in the US is progressive, which means that your income is taxed at different levels. For example, if your taxable income is $ 50,000 in 2020, not everything will be taxed at 22%. Part of this is taxed in lower brackets.

You can calculate the tax bracket you fall into by dividing your taxable income into groups – the tax brackets. Each group has its own tax rate. The bracket you are in also depends on your registration status: if you are a single registrant, joint registration, separate registration, or head of household.

The tax bracket your top dollar falls into is your marginal tax bracket. This tax bracket is the highest tax rate that applies to the upper part of your income.

For example, if you are single and your 2020 taxable income is $ 75,000, your marginal tax bracket is 22%. Since your total taxable income is not taxed at 22%, part of your income is taxed with the lower tax brackets 10% and 12%. As your income goes up the ladder, your taxes go up. Check out this example for someone with $ 75,000 in taxable income:

  • The first $ 9,875 is taxed at 10%: $ 987.50.
  • The next $ 30,249 ($ 40,125-9,876) is taxed at 12%: $ 3,629.88.
  • The final $ 34,874 ($ 75,000- $ 40,126) is taxed at 22% $ 7,672.28.
  • The total tax amount on your $ 75,000 income is $ 987.50 + $ 3,629.88 + $ 7,672.28 = $ 12,289.66 (excluding any individual or standard deductions that may apply to your taxes).

Opportunities to move to a lower tax bracket

You can lower your income to a different tax bracket by using tax deductions such as donations or the deduction of property taxes and mortgage interest on a home loan and property taxes. Deductions can lower how much of your income is ultimately taxed.

You can also assign tax credits such as the tax credit for earned income or the tax credit for children to a lower tax bracket. They allow a dollar-for-dollar reduction in the taxes you owe.

Estimate your child’s tax credit

Depending on your financial situation, you can use both tax deductions and credits to lower the amount you pay Uncle Sam each year.

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