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What Is My Tax Bracket for the 2021 Tax Year? Thumbnail

What Is My Tax Bracket for the 2021 Tax Year?

Insights

It's never too early to start looking at your tax obligations for the coming tax season. With COVID-19 impacting many Americans through 2021, it's possible your income and deductions may have changed. The information in this article is for the 2021 tax year, which most taxpayers will file in 2022.

The seven 2020 tax rates themselves didn't change (they are the same as those in effect for the 2020 tax year), however, the tax bracket ranges were modified based on inflation. Because of this, it's possible you could be in a different tax bracket for 2021 than the last time you reported your taxes, even if your income has not changed.1

Reminder: Tax Brackets Are Marginal

The IRS divides income into different tax rates. Each subsequent portion of your income will have an increased tax rate. For example, if you are a single filer who made $40,125 in 2020, your first $9,950 will be taxed at 10 percent. The next portion of your income will be taxed at an increased rate; from $9,951 to $40,525, your tax rate will be 12 percent. 

As your income increases, you’ll fall into higher tax brackets and will have a higher tax rate for each portion of your income. 

Why Would My Tax Bracket Be Different? 

The IRS regularly adjusts tax brackets to take inflation into consideration. This is because, with inflation, people will face higher prices, meaning the purchasing power of their dollar is decreased. Knowing this, the IRS adjusts brackets in order to avoid bracket creep, a circumstance that occurs when inflation pushes your income into a higher tax bracket, or credits and deductions are reduced. In this scenario, an individual may not actually have increased purchasing power or greater disposable income, even with an increase in wages and salaries.2

2021 Tax Brackets 

Without further ado, here are the 2021 tax brackets according to your filing status and income from the IRS.1

10% Tax Rate

  • Single Individuals: from $0 to $9,950
  • Married Individuals Filing Jointly: from $0 to $19,900
  • Heads of Households: from $0 to $14,200
  • Married Individuals Filing Separately: from $0 to $9,950

12% Tax Rate

  • Single Individuals: from $9,951 to $40,525 
  • Married Individuals Filing Jointly: from $19,901 to $81,050    
  • Heads of Households: from $14,201 to $54,200
  • Married Individuals Filing Separately: from $9,951 to $40,525

22% Tax Rate

  • Single Individuals: from $40,526 to $86,375   
  • Married Individuals Filing Jointly: from $81,051 to $172,750       
  • Heads of Households: from $54,201 to $86,350
  • Married Individuals Filing Separately: from $40,526 to $86,375

24% Tax Rate

  • Single Individuals: from $86,376 to $164,925        
  • Married Individuals Filing Jointly: from $172,751 to $329,850   
  • Heads of Households: from $86,351 to $164,900
  • Married Individuals Filing Separately: from $86,376 to $164,925

32% Tax Rate

  • Single Individuals: from $164,926 to $209,425    
  • Married Individuals Filing Jointly: from $329,851 to $418,850        
  • Heads of Households: from $164,901 to $209,400
  • Married Individuals Filing Separately: from $164,926 to $209,425

35% Tax Rate

  • Single Individuals: $209,426 to $523,600
  • Married Individuals Filing Jointly: from $418,851 to $628,300
  • Heads of Households: from $209,401 to $523,600
  • Married Individuals Filing Separately: from $209,426 to $314,150

37% Tax Rate

  • Single Individuals: over $523,600    
  • Married Individuals Filing Jointly: over $628,300    
  • Heads of Households: over $523,600
  • Married Individuals Filing Separately: over $314,150

In addition to the tax inflation adjustments, the IRS also altered standard deductions. While the above rates and brackets are at the federal level, different states might have varying brackets and rates.

If you have any questions for us, please don't hesitate to reach out.

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  1. https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2021
  2. https://www.aier.org/article/bracket-creep-a-real-problem-for-taxpayers/

About the Author

Jason P. Berube is the Founder and CEO of Cornerstone Wealth Consulting Services, LLC in the Boston area. He specializes in helping contractors build wealth and protect their family business for generational growth.  

This content is developed from sources believed to be providing accurate information, and provided by Cornerstone Wealth Consulting Services LLC. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.