What are the tax brackets?

 

U.S. income tax rates are divided into seven segments commonly known as tax brackets. All taxpayers pay increasing rates as their income rises through these segments. If you’re trying to determine your marginal tax rate or your highest federal tax bracket, you’ll need to know two things:

  • your filing status. That means whether you file as single, married (jointly or separately) or as head of household.
  • your taxable income. Your taxable income does not equal your wages; rather it’s the total of your ordinary income sources (wages, investment interest, retirement distributions, etc.) minus any adjustments and deductions. Need help determining this number? Find out how to calculate your taxable income.

2020 federal tax brackets

The tax bracket specific income ranges can shift slightly each year due to inflation adjustments, so you’ll want to reference the year when you review income tax brackets. Here we outline the 2020 tax brackets. If you need to reference the tax brackets for 2019, you’ll find those lower on the page.

Note: The brackets for Qualifying Widow(ers) are the same as for Married Filing Jointly status.

 2020 tax brackets
Rate Single Married Filing Separately Married Filing Jointly Head of Household
Taxable income over . . .
10%             $0             $0             $0             $0
12%    $9,875     $9,875   $19,750   $14,100
22%   $40,125   $40,125   $80,250   $53,700
24%   $85,525   $85,525 $171,050   $85,500
32% $163,300 $163,300 $326,600 $163,300
35% $207,350 $207,350 $414,700 $207,350
37% $518,400 $311,025 $622,050 $518,400

 

Understanding how federal income tax brackets work

Once you know your filing status and amount of taxable income, you can find your tax bracket. However, you should know that not all of your income is taxed at that rate. For example, if you fall in the 22% tax bracket, not all of your income is taxed at 22%. Why is that?

The reason is that the U.S. income tax system uses a graduated tax system, designed so that individual taxpayers pay an increasing rate as their income rises as outlined in the 2020 tax table above.

Let’s look at Sarah, whose filing status is Single and who has a taxable income of $50,000. Using the 2020 information above, we can determine Sarah’s total tax.

2020 Tax brackets explained example.

  1. Determine the amount of tax for each segment of taxable income. Sarah will pay:
    • 10% on the first $9,875 of taxable income
    • 12% on the next $30,249 ($40,125-$9,876)
    • 22% on the remaining $9,874 ($50,000-$40,126)
  2. Add the taxable amounts for each segment ($988 + $3,630 + $2,172) = $ 6,790

For 2020, Sarah will pay $6,790 in tax.

Income tax brackets: Important terms

The terminology around income tax brackets and tax rates can be confusing at times. To clarify what’s meant, let’s review a few relevant terms that relate to this topic.

  • Income Tax Rate – These are the various percentages at which taxes are applied.
  • Income Tax Brackets – These are the ranges of income to which a tax rate applies. Currently there are seven ranges or segments.
  • Marginal Tax Rate – This is the rate at which the last dollar of income is taxed. In the example above, Sarah’s marginal tax rate is 22%.
  • Effective or Average Tax Rate – This is the total tax paid as a percentage of total income taxed. In Sarah’s case, her average tax rate is 13.6% ($6,790 / $50,000).

In addition to these definitions, it’s helpful to understand that the percentages in the table above apply to income from ordinary sources. A separate set of tax rates apply to other categories of income. For instance, to the extent your gains fall below a rate threshold amount, any long-term capital gains you receive are taxed at 0% or 15%.

2019 tax brackets

Finishing up your 2019 filing? Use the following table to determine your 2019 tax brackets.

2019 tax brackets

Rate Single Married Filing Separately Married Filing Jointly Head of Household
Taxable income over . . .
10%             $0             $0             $0             $0
12%     $9,700     $9,700   $19,400   $13,850
22%   $39,475   $39,475   $78,950   $52,850
24%   $84,200   $84,200 $168,400   $84,200
32% $160,725 $160,725 $321,450 $160,700
35% $204,100 $204,100 $408,200 $204,100
37% $510,300 $306,175 $612,350 $510,300

 

U.S. tax bracket questions?

Want to understand how the changes to the tax brackets affect you? Or learn how you may be able to lower your taxable income? The knowledgeable tax pros at H&R Block can help.

 

Related Topics

Related Resources

IRS Underpayment Penalty

Learn more about the IRS underpayment tax penalty from the tax experts at H&R Block.

IRS Letter 3289 – Notice of Determination Concerning Request for Innocent Spouse Relief

Did you receive IRS Letter 3289? Learn more about letter 3289 and how to handle it with help from the tax experts at H&R Block.

What You Should Know About Alimony and Tax Reform

Learn more about how tax reform has changed the rules for alimony with the tax experts at H&R Block. See how these changes could affect you.

Who Has To Pay AMT?

Who has to pay the AMT, and why? How would it affect your adjustments and deductions? Get tax answers today at H&R Block.