Your 2021 tax bracket and federal tax rate are both crucial pieces of information if you want to keep as much of your money as possible. The first step to surviving tax season is to know which bracket you fall into and which category you’ll file under. From there, do everything possible to reduce your taxable income — without concealing income, of course. If you’re uncertain about anything, ask for advice from a professional and use an income tax calculator.
What Is My Tax Bracket?
Your federal income tax bracket is based on your tax filing status and your income. To help you quickly figure out which IRS income tax bracket you’re in, check the IRS federal tax table for 2021:
|Federal Tax Brackets 2022 for Income Taxes Filed by April 18, 2022|
|Tax Bracket||Single||Married Filing Jointly or Qualifying Widow(er)||Married Filing Separately||Head 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||$207,351 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|
For tax year 2022, here is what the federal brackets will look like:
|Federal Tax Brackets 2022 for Income Taxes Filed by April 15, 2023|
|Tax Rate||Single||Married Filing Jointly or Qualifying Widow(er)||Married Filing Separately||Head of Household|
|10%||$0 to $10,275||$0 to $20,550||$0 to $10,275||$0 to $14,650|
|12%||$10,276 to $41,775||$20,551 to $83,510||$10,276 to $41,775||$14,651 to $55,900|
|22%||$41,776 to $89,075||$83,511 to $178,150||$41,776 to $89,075||$55,901 to $89,075|
|24%||$89,076 to $170,050||$178,151 to $340,100||$89,076 to $170,050||$89,076 to $170,050|
|32%||$170,051 to $215,950||$340,101 to $431,900||$170,051 to $215,950||$170,051 to $215,950|
|35%||$215,951 to $539,900||$431,901 to $647,850||$215,951 to $323,925||$215,951 to $539,900|
|37%||$539,901 or more||$647,851 or more||$323,926 or more||$539,901 or more|
What Is a Tax Bracket?
The U.S. uses the 2021 federal income tax brackets to determine how much money you’ll owe the IRS or how much of a federal income tax refund you will receive. IRS tax brackets are divided based on your taxable income level, with different amounts taxed at different federal income tax rates.
How Tax Brackets Work
Federal income tax brackets are determined by income and filing status. However, it’s important to understand that your entire income is not taxed at your tax bracket rate. That’s because the U.S. uses a graduated tax system, which means that taxpayers pay an increasing rate as their income rises.
To understand how tax brackets work, take the example of a married couple filing jointly whose taxable annual income is $700,000. This status puts them in the highest tax bracket, which is taxed at a rate of 37%. However, this tax rate only applies to any income over $628,300, and that amount gets added to $168,994 — the sum of the graduated taxes paid on incomes up to $628,300. This couple would owe 37% on $71,700, which amounts to $26,529. That gets added to $168,994, so the total taxes owed by this couple would be $195,323.
How Is the Marginal Tax Rate Determined for Different Incomes in the Same Bracket?
Taxpayers in the first bracket, who earn the least income, pay a flat rate of 10% in every filing category. Those who fall into the remaining brackets pay a flat rate that’s applicable to everyone in the bracket and then a percentage of the income they earn over the bracket’s minimum. For example, head of household filers who earn between $86,350 and $164,900 will pay $13,293 plus 24% of any amount over $86,350.
How Many Federal Tax Brackets Are There?
Each individual filing category contains seven income-based 2021 federal tax brackets. Brackets range from those who made no income at all to the wealthiest individuals — in the highest federal tax rate bracket — who earn $628,301 or more in a tax year.
What Are the Different Tax Filing Categories?
Virtually all Americans — those not filing as a trust or estate — fall into one of five tax filing categories. The category you fall under will be an indicator of which 2021 tax forms you’ll need to fill out, and what tax bracket applies to your situation:
- Individual taxpayers — also known as single filing status for Form 1040
- Married individuals filing jointly
- Married individuals filing separately
- Heads of household
- Qualifying widow or widower
The tax brackets for married filing jointly and qualifying widow/widower are identical, so some consolidate the five filing statuses into four.
Read Next: Every Tax-Filing Status Explained
Who Qualifies as Head of Household When Filing Taxes?
You could qualify to file as head of household if you meet all of the following requirements:
- You’re unmarried or considered 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 for more than half the year.
If the qualifying person you’re claiming is a dependent parent, however, the person doesn’t have to live with you for you to file head of household. If you qualify as a head of household filer, your 2021 tax rate will be lower. Plus, you’ll receive a 2021 standard deduction that’s higher than if you were to file single or married filing separately.
Are There Ways To Lower Taxable Income Other Than Deductions?
Yes. Aside from deductions, there are ways to lower your IRS tax rate by reducing your taxable income. For example, contributing to tax-deferred retirement accounts such as a 401(k) or an individual retirement account can help taxpayers shave thousands off their annual taxable income, all while saving for life after their earning years. You’ll eventually have to pay taxes when that money is withdrawn, but retirees have even more ways available to help them wiggle into a lower tax bracket when that time comes. For example, certain medical expenses like in-home care and medications are considered tax deductible.
For working people with low-to-moderate income, the earned income tax credit reduces the amount of tax you owe and might even give you a refund. To qualify for the EITC, you must have earned income as an employee or from running or owning a business or farm. You must meet some other rules, which could include having a qualifying child.
What Are the Most Recent Changes to the Federal Bracket System?
The Tax Cuts and Jobs Act, enacted in December 2017, was the most recent significant overhaul to the U.S. tax system. With the exception of annual inflationary adjustments, the federal bracket system remains the same as it did after the 2017 act. For most people, tax rates were reduced. Since the 2018 tax year, tax brackets have been set at 10%, 12%, 22%, 24%, 32%, 35% and 37%.
In addition, beginning in 2018, the tax rates and brackets for the unearned income of a child changed and were no longer affected by the tax situation of the child’s parents. The new tax rates applied to a child’s unearned income of more than $2,200 are the same as for trusts and estates, which are 10%, 24%, 35% and 37%.
For tax year 2021, the standard deduction rises from 2020 levels to $12,550 for single filers, $25,100 for married filing jointly, $12,550 for married filing separately and $18,800 for heads of household.
However, the tax reform also suspended personal exemptions and discontinued certain deductions.
Can I Deduct My Way Down to a Lower Tax Bracket?
Sure, but it’s illegal to try to conceal income from the IRS. The likelihood of getting caught is high, and the penalties for doing so are severe. However, the IRS allows taxpayers to reduce their level of taxable income by taking a range of legal tax deductions, such as charitable donations, home business costs and some education-related expenses.
Does Every State Use the Same Tax Bracket System?
The answer depends on the state. Tax structures, rates, allowable tax deductions and tax exemptions vary from state to state, according to the Tax Foundation. So yes, some states have a tiered bracket system but other states employ a flat tax with one rate for all incomes. Nine states don’t levy any income tax at all.
When Is It Better for Married Couples To File Jointly?
Even with defined married-filing-separately tax brackets and married-filing-jointly tax brackets, this is a complex question that doesn’t come with a single, uniform answer.
“Generally, it is better to file a joint return because taxes are lower for married filing separately and the standard deduction rate is higher,” said Mark Steber, chief tax officer at Jackson Hewitt. “There are more credits and deductions available on married filing jointly returns.”
It makes sense to file jointly when each spouse earns roughly the same income and there aren’t a lot of complicated, itemized deductions. To figure out whether it’s more advantageous to file separately or jointly, consider preparing your IRS tax return both ways. Then you can decide what to go with, based on the refund or balance due from each method.
When Should Married Couples File Separately?
Couples who have lopsided incomes or assets and who plan on taking many itemized deductions should seek professional advice on how to answer the complicated question of whether to file separately. Generally, couples should consider filing separately if filing jointly bumps them into a higher tax bracket. They should remember, however, that filing separately might cost them perks such as valuable child tax credits, and it might reduce the amount they can contribute to retirement funds such as IRAs.
What’s the Difference Between Married Filing Separately and Married Filing Jointly?
When a married couple files separately, each partner acknowledges the marriage, but submits separate returns and doesn’t take legal responsibility for the other spouse’s return. On the other hand, filing jointly means a married couple lumps together their incomes and expenses.
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Krista Baum contributed to the reporting for this article.