2021 Tax Brackets, based on Taxable Income
It’s never too early to start thinking about your next tax return. For most Americans, that’ll be your federal tax return for the 2021 tax year — which, by the way, will be due on April 18, 2022 (April 19 for residents of Maine and Massachusetts). The tax rates themselves didn’t change from 2020 to 2021. There are seven tax rates in effect for both the 2021 and 2020 tax years: 10%, 12%, 22%, 24%, 32%, 35% and 37%. However, as they are every year, the 2021 tax brackets were adjusted to account for inflation. That means you could wind up in a different tax bracket when you file your 2021 return than the bracket you were in for 2020 – which also means you could be subject to a different tax rate on some of your 2021 income.
The tax bracket ranges also differ based on your filing status. The chart below shows you the ranges for the various filing statuses.
2021 Tax Brackets, based on Taxable Income
| Tax Rate | Single | Head of Household |
Married Filing Jointly | Married Filing Separately |
| 10% | Up to $9,950 | Up to $14,200 | Up to $19,900 | Up 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% | Over $523,600 | Over $523.600 | Over $628,300 | Over $314,150 |
How the Tax Brackets Work
Suppose you’re single and have $90,000 of taxable income in 2021. Since $90,000 is in the 24% bracket for singles, would your tax bill simply be a flat 24% of $90,000 – or $21,600? No! Your tax would actually be less than that amount. That’s because, using marginal tax rates, only a portion of your income would be taxed at the 24% rate. The rest of it would be taxed at the 10%, 12%, and 22% rates.
Here’s how it works. Again, assuming you’re single with $90,000 taxable income in 2021, the first $9,950 of your income is taxed at the 10% rate for $995 of tax. The next $30,575 of income (the amount from $9,951 to $40,525) is taxed at the 12% rate for an additional $3,669 of tax. After that, the next $45,850 of your income (from $40,526 to $86,375) is taxed at the 22% rate for $10,087 of tax. That leaves only $3,625 of your taxable income (the amount over $86,375) to be taxed at the 24% rate, which comes to an addition $870 of tax. When you add it all up, your total 2021 tax is only $15,621. (That’s $5,979 less than if a flat 24% rate was applied to the entire $90,000.)
The Marriage Penalty
The difference between bracket ranges sometimes creates a “marriage penalty.” This tax-law twist makes certain married couples filing a joint return — typically, where the spouses’ incomes are similar — pay more tax than they would if they were single. The penalty is triggered when, for any given rate, the minimum taxable income for the joint filers’ tax bracket is less than twice the minimum amount for the single filers’ bracket.
Before the 2017 tax reform law, this happened in the four highest tax brackets. But now, as you can see in the tables above, only the top tax bracket contains the marriage penalty trap. As a result, only couples with a combined taxable income over $628,300 are at risk for this “penalty” when filing their 2021 federal tax return. (Note that the tax brackets for your state’s income tax could contain a marriage penalty.)
A New Top Tax Rate in the Future?
Will the top income tax rate go up in the near future? It will if President Biden gets his way. As part of his American Families Plan, the president has proposed increasing the highest tax rate from 37% to 39.6%, which is where it was before the Tax Cuts and Jobs Act of 2017. The 39.6% rate would apply to single filers with taxable income over $452,700 and joint filers with taxable income exceeding $509,300. Only time will tell if this change comes to pass. Meanwhile, you can use this information to plan your tax strategies for the remainder of 2021.
