Each year, the IRS makes a series of inflation-related adjustments to the U.S. tax code. So, even if there are no major changes in the tax law, the tax brackets are likely to change.
That's exactly what has happened for the 2021 tax year. Here's an overview of the 2021 tax brackets, how they've changed from 2020, and some other important information that will be used to calculate your taxable income in both 2020 and 2021.
Image source: Getty Images.
The 2021 tax brackets
We won't keep you in suspense. Here are the 2021 U.S. federal income tax brackets.
First, the tax brackets for single filers:
|
Marginal Tax Rate (Tax Bracket) |
Taxable Income Range |
|---|---|
|
10% |
$0-$9,950 |
|
12% |
$9,950-$40,525 |
|
22% |
$40,525-$86,375 |
|
24% |
$86,375-$164,925 |
|
32% |
$164,925-$209,425 |
|
35% |
$209,425-$523,600 |
|
37% |
Greater than $523,600 |
Data source: IRS.
Now, tax brackets for married couples filing a joint return:
|
Marginal Tax Rate (Tax Bracket) |
Taxable Income Range |
|---|---|
|
10% |
$0-$19,900 |
|
12% |
$19,900-$81,050 |
|
22% |
$81,050-$172,750 |
|
24% |
$172,750-$329,850 |
|
32% |
$329,850-$418,850 |
|
35% |
$418,850-$628,300 |
|
37% |
Greater than $628,301 |
Data source: IRS.
Here are the tax brackets for head of household filers. In a nutshell, the head of household status is designed for people who are unmarried but have dependents. Single parents generally use the head of household status, for example.
|
Marginal Tax Rate (Tax Bracket) |
Taxable Income Range |
|---|---|
|
10% |
$0-$14,200 |
|
12% |
$14,200-$54,200 |
|
22% |
$54,200-$86,350 |
|
24% |
$86,350-$164,900 |
|
32% |
$164,900-$209,400 |
|
35% |
$209,400-$523,600 |
|
37% |
Greater than $523,600 |
Data source: IRS.
Now, tax brackets for married couples filing separate returns. It comes as a surprise to many people, but the tax brackets for married couples who choose to file separate returns aren't the same as for single filers. Instead, tax brackets for married couples filing separately are half of what they are for the corresponding marginal tax brackets for joint filers.
|
Marginal Tax Rate (Tax Bracket) |
Taxable Income Range |
|---|---|
|
10% |
$0-$9,950 |
|
12% |
$9,950-$40,525 |
|
22% |
$40,525-$86,375 |
|
24% |
$86,375-$164,925 |
|
32% |
$164,925-$209,425 |
|
35% |
$209,425-$314,150 |
|
37% |
Greater than $314,150 |
Data source: IRS.
The 2020 tax brackets (and how they changed in 2021)
Each year, the IRS adjusts the tax brackets for inflation. For 2021, the tax bracket thresholds were increased by approximately 1% over 2020 levels.
To clarify, the 2021 tax brackets are the rates that will determine your income tax in 2021, which is the tax return you'll file in 2022. If you are wondering how much tax you'll owe when you go to file your 2020 tax return in April 2021, here's a quick guide to the 2020 U.S. marginal tax brackets.
Tax brackets for single filers:
|
Marginal Tax Rate (Tax Bracket) |
Taxable Income Range |
|---|---|
|
10% |
$0-$9,875 |
|
12% |
$9,875-$40,125 |
|
22% |
$40,125-$85,525 |
|
24% |
$85,525-$163,300 |
|
32% |
$163,300-$207,350 |
|
35% |
$207,350-$518,400 |
|
37% |
Above $518,400 |
Data source: IRS.
Tax brackets for married couples filing a joint return:
|
Marginal Tax Rate (Tax Bracket) |
Taxable Income Range |
|---|---|
|
10% |
$0-$19,750 |
|
12% |
$19,750-$80,250 |
|
22% |
$80,250-$171,050 |
|
24% |
$171,050-$326,600 |
|
32% |
$326,600-$414,700 |
|
35% |
$414,700-$622,050 |
|
37% |
Above $622,050 |
Data source: IRS.
Tax brackets for head of household filers:
|
Marginal Tax Rate (Tax Bracket) |
Taxable Income Range |
|---|---|
|
10% |
$0-$14,100 |
|
12% |
$14,100-$53,700 |
|
22% |
$53,700-$85,500 |
|
24% |
$85,500-$163,300 |
|
32% |
$163,300-$207,350 |
|
35% |
$207,350-$518,400 |
|
37% |
Above $518,400 |
Data source: IRS.
Tax brackets for married couples filing separate returns:
|
Marginal Tax Rate (Tax Bracket) |
Taxable Income Range |
|---|---|
|
10% |
$0-$9,875 |
|
12% |
$9,875-$40,125 |
|
22% |
$40,125-$85,525 |
|
24% |
$85,525-$163,300 |
|
32% |
$163,300-$207,350 |
|
35% |
$207,350-$311,025 |
|
37% |
Above $311,025 |
Data source: IRS.
2020-2021 Capital gains tax brackets
Not all income is taxed according to the marginal tax brackets, and capital gains (income from when you sell an investment or asset for a profit) are the big exception. For example, if you sell a stock for more than you paid for it, you have a capital gain.
When it comes to capital gains, the tax treatment depends on how long you owned the asset. Any capital gains that result from selling an asset you owned for a year or less will be treated as a short-term gain and will be taxable according to the tax brackets listed earlier. But long-term gains that result from sales of assets held for over a year get a preferential tax treatment, and are taxed according to these brackets for 2021:
|
Long-Term Capital Gains Tax Rate |
Single Filers (taxable income) |
Married Filing Jointly |
Heads of Household |
Married Filing Separately |
|---|---|---|---|---|
|
0% |
$0-$40,400 |
$0-$80,800 |
$0-$54,100 |
$0-$40,400 |
|
15% |
$40,401-$445,850 |
$80,801-$501,600 |
$54,101-$473,750 |
$40,401-$250,800 |
|
20% |
$445,851 or more |
$501,601 or more |
$473,751 or more |
$250,801 or more |
Data source: IRS. Figures represent taxable income, not just taxable capital gains.
In addition to these rates, a 3.8% net investment income tax is assessed on the capital gains of high earners, regardless of whether they are long- or short-term in nature. This applies to taxpayers who have net investment income and modified adjusted gross income (MAGI) over the following thresholds (Note: Under current tax law, these amounts do not change from year-to-year:
- Married filing jointly: $250,000
- Married filing separately: $125,000
- Single: $200,000
- Head of household: $200,000
- Qualified widow(er) with dependent child: $250,000
And here's how they compare to 2020's capital gains tax brackets:
|
Capital Gains Rate |
Single Filers (taxable income) |
Married Filing Jointly |
Heads of Household |
Married Filing Separately |
|---|---|---|---|---|
|
0% |
$0-$40,000 |
$0-$80,000 |
$0-$53,600 |
$0-$40,000 |
|
15% |
$40,000-$441,450 |
$80,000-$496,050 |
$53,600-$469,050 |
$40,000-$248,300 |
|
20% |
Over $441,450 |
Over $496,050 |
Over $469,050 |
Over $248,300 |
Data Source: IRS.
The 2021 standard deduction has increased as well
Since it is used in determining taxable income, it's worth mentioning that the standard deduction has been adjusted for inflation as well. Here's a quick look at how the 2021 standard deduction has increased from 2020.
|
Filing Status |
2020 Standard Deduction |
2021 Standard Deduction |
|---|---|---|
|
Married filing jointly |
$24,800 |
$25,100 |
|
Head of household |
$18,650 |
$18,800 |
|
Single/married filing separately |
$12,400 |
$12,550 |
Data source: IRS.
Could the 2021 tax brackets change?
As a final thought, it's worth noting that it's entirely possible that these tax brackets could end up changing, depending on the outcome of the election. While it's unlikely that any changes would be retroactive to January 2021 (recall that the Tax Cuts and Jobs Act went into effect in 2018, President Trump's first full year in office), it's entirely possible.
