Let’s talk about tax brackets for 2021.

Some things stayed the same, but we also saw a few changes in the brackets this year and we’ll be going over both in this post.

What Stayed The Same in Tax Brackets 2021?

This tax season, what are the things that remain unchanged?

Well, the number of tax brackets did not change in 2021. There are still a total of seven tax brackets.

The tax rates themselves also remain the same in 2021. There are still seven tax rates:

• 10%
• 12%
• 22%
• 24%
• 32%
• 35%
• 37%

What Changed in Tax Brackets 2021?

Well, we’re glad you asked.

The biggest change to the 2021 tax brackets was the brackets themselves. The tax brackets increased across all brackets and all filing statuses this year.

Now a quick note on tax brackets, tax brackets are adjusted annually to reflect changes in the cost of living also known as inflation.

And because inflation in the U.S. normally rises, we typically see the tax brackets rise as well year over year.

Now compared to 2020, in 2021, we saw a tax bracket increase anywhere between 0.71% to 1%, with an average increase of 1% percent.

So let’s go ahead and discuss how tax brackets work for each filing status. BUT, if you have any specific questions, be sure to reach out to your tax consultant.

Tax Brackets 2021 for Every Filing Status

1. Single Filers Tax Brackets

Single filers meaning you are:

• unmarried,
• divorced,
• a registered domestic partner, or
• legally separated

…here are your 2021 tax brackets.

So, we see here that the first $9,950 of taxable income will be taxed at 10%. That is an increase of about $75 when compared to 2020.

After that, any income between $9,951 and $40,525 would be taxed at 12%, which is a $400 increase when compared to 2020.

Then, income between $40,526 and $86,375 will be taxed at 22%, which is an increase of $850.

Next, any income between $86,376 and $164,925 will be taxed at 24% and we see that as an increase of $1,625.

Any income between $164,926 and $209,425 will be taxed at 32%, which is an increase of $2,075 when compared to 2020.

Then, any income between $209,426 and $523,600 will be taxed at 35%. This is an increase of about $5,200 five compared to 2020.

Lastly, any income after $523,601 or more will be taxed at 37%.

2. Married Filing Jointly Tax Brackets

Married filing jointly meaning you are married by the end of the tax year and want to file your tax return jointly with your spouse.

Here are your 2021 taxable income brackets.

The first $19,900 will be taxed at 10%, which is an increase of $150 when compared to 2020.

Next is any income between $19,901 and $81,050 would be taxed at 12%, which we see is an increase of $800 compared to 2020.

The next income between $81,051 and $172,750 is taxed at 22%. This is an increase of $1,700 compared to 2020.

Then, any income between $172,751 and $329,850 would be taxed at 24%, which is an increase of $3,250.

Next, any income between $329,851 and $418,850 will be taxed at 32%. This is an increase of $4,150 when compared to 2020.

Then we have any income between$418,851 and $628,300 will be taxed at 35%, which is a big increase. Here we see an increase of $10,400 when compared to 2020.

Finally, any income you make after $628,301 or more will be taxed at 37%.

3. Married Filing Separately Tax Brackets

If your following status is married filing separately which means you are married but choose to file your return separately from your spouse, your 2021 taxable income brackets will mirror that of a single filer.

So the first $9,950 of taxable income will be taxed at 10%. That is an increase of about $75 when compared to 2020.

After that, any income between $9,951 and $40,525 would be taxed at 12%, which is a $400 increase when compared to 2020.

Then, income between $40,526 and $86,375 will be taxed at 22%, which is an increase of $850.

Next, any income between $86,376 and $164,925 will be taxed at 24% and we see that as an increase of $1,625.

Then, any income between $164,926 and $209,425 will be taxed at 32%, which is an increase of $2,075 when compared to 2020.

Any income between $209,426 and $314,150 will be taxed at 35%. This is an increase of about $5,200 five compared to 2020.

Finally, any income after $314,151 or more will be taxed at 37%.

4. Head of Households Tax Brackets

Now if your filing status is head of household, this means you are:

• single or unmarried and pay at least fifty percent of the cost to support your household and
• live with the qualifying family member who you supported for more than half of the year

…here are your 2021 taxable income brackets.

The first $14,200 you make will be taxed at 10%, which is a $100 increase compared to 2020.

Next is any income between $14,201 and $54,200 will be taxed at 12%, This is an increase of $500 when compared to 2020.

After that, all income between $54,201 and $86,350 will be taxed at 22%, which we see is an $850 increase from 2020.

Then any income you make between $86,351 and $164,900 will be taxed at 24%. This is an increase of $1600 when compared to 2020.

Any income between $164,901 and $209,400 will be taxed at 32%, which is an increase of $2050.

Next is any income between $209,401 and $523,600 would be taxed at 35%. There’s an increase of $5,200 here.

Lastly, any income you make at $523,601 or more will be taxed at 37%.

How Tax Brackets Work

Now that we know the changes for tax brackets in 2021, let’s look at how tax brackets actually work.

Here’s what we know so far, we know that there are 7 tax rates and 7 tax brackets. So here are a few other things you should know about tax brackets.

1. The United States tax rates are both progressive and marginal progressive.

This means the tax rate rises as your income rises. And, marginal meaning each tax rate applies to a portion of the income within a tax bracket.

Let’s look at an example, say you are single and have a taxable income of $50,000.

In the year 2021, you paid 10% on the first $9,875 of your income.

And then 12% on the portion of income between $9,876 and $40,125.

Then, you’d pay 22% on the remaining portion between $40,126 and $50,000.

So in total, you’d pay close to $6,800 in taxes on $50,000 of taxable income.

2. Tax brackets and tax rates apply to your ordinary income.

It’s true that the tax brackets we went over today do not apply to all of your income. You see, the tax brackets only apply to your taxable income.

And taxable income is your total ordinary income minus any tax credits and tax deductions that you take.

So ordinary income includes things like:

• wages
• rental income
• loan interest
• investments helped shorter than a year

Speaking of investments, don’t confuse capital gains tax rates – the tax rates we went over today.

And that’s because capital gains from investments held longer than a year are taxed at a separate long-term capital gains tax rate.

These are often much lower than the tax rates for normal income.

3. States have separate tax tables.

You see, the tax brackets we looked at today were federal tax brackets and tax rates.

Now the state you live in will have its own specific tax bracket table similar to the ones mentioned today.

That is unless you live in a non-income tax state.

Final Takeaways

There you have it – tax brackets for 2021!

We hope you found this post helpful. However, as we mentioned above, if you need advice on your specific tax situation. then don’t hesitate to give us a call today.

We have a team of reliable and expert accountants for taxes who can help you.