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IRS Releases Income Tax Brackets for 2021

Tax planning is all about thinking ahead. And since the federal income tax brackets for the 2021 tax year are now available, you can start thinking about how to handle your 2021 finances in a tax-efficient way — even though it's still 2020.

The tax rates haven't changed since 2018. For 2021, they're still set at 10%, 12%, 22%, 24%, 32%, 35% and 37%. (Note that Joe Biden wants to increase the top rate if he's elected.) However, the tax brackets are adjusted (or "indexed") each year to account for inflation. The inflation-adjusted tax brackets for 2021 are below (for the 2020 tax brackets, see What Are the Income Tax Brackets for 2020?).

When using the tax brackets, it's important to remember that the tax rates only apply to the income that falls within the applicable tax bracket range for your filing status. For instance, a married couple filing a joint return with $100,000 of taxable income in 2021 won't pay $22,000 in tax just because their total taxable income falls within the 22% bracket for joint filers. The 22% rate is not applied as a flat rate on the entire $100,000. Instead, using marginal tax rates, the first $19,900 of income is taxed at the 10% rate for a tax of $1,990 on that portion of the income. The next $61,150 of income (the amount from $19,900 to $81,050) is taxed at the 12% rate for an additional tax of $7,338. Then, only the last $18,950 (the amount over $81,050) is taxed at the 22% rate for $4,169 of tax. That comes to a total tax bill of only $13,497. (That's $8,503 less than if a flat 22% rate was applied to the entire $100,000.)

2021 Tax Brackets for Single Filers and Married Couples Filing Jointly

Tax Rate

Taxable Income
(Single)

Taxable Income
(Married Filing Jointly)

10%

Up to $9,950

Up to $19,900

12%

$9,951 to $40,525

$19,901 to $81,050

22%

$40,526 to $86,375

$81,051 to $172,750

24%

$86,376 to $164,925

$172,751 to $329,850

32%

$164,926 to $209,425

$329,851 to $418,850

35%

$209,426 to $523,600

$418,851 to $628,300

37%

Over $523,600

Over $628,300

2021 Tax Brackets for Married Couples Filing Separately and Head-of-Household Filers

Tax Rate

Taxable Income
(Married Filing Separately)

Taxable Income
(Head of Household)

10%

Up to $9,950

Up to $14,200

12%

$9,951 to $40,525

$14,201 to $54,200

22%

$40,526 to $86,375

$54,201 to $86,350

24%

$86,376 to $164,925

$86,351 to $164,900

32%

$164,926 to $209,425

$164,901 to $209,400

35%

$209,426 to $314,150

$209,401 to $523,600

37%

Over $314,150

Over $523,600

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