What are the tax brackets?

 

U.S. income tax rates are divided into seven segments commonly known as tax brackets. All taxpayers will fall into one of these segments. If you’re trying to determine your 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.

2019 federal tax brackets

This table reflects the 2019 tax brackets after tax reform was enacted for all filing statuses. Note: the brackets for Qualifying Widow(ers) are the same as for Married Filing Jointly status. For the 2020 tax brackets, review the table found lower on this page.

 

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 $510,300 $612,350 $510,300

Understanding how federal income tax brackets and rates 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 2019 tax table above.

Let’s look at Sarah, whose filing status is Single and who has a taxable income of $50,000. Using the 2019 information above, we can determine Sarah’s total tax.

  1. Determine the amount of tax for each segment of taxable income. Sarah will pay:
    • 10% on the first $9,700 of taxable income
    • 12% on the next $29,775 ($9,701-$39,475)
    • 22% on the remaining $10,525 (S39,476-$50,00)
  2. Add the taxable amounts for each segment ($970 + $3,573 + $2,315.50) = $ 6,858.50

For 2019, Sarah will pay $6,858.50 in taxable income.

Also, as mentioned earlier, these rates apply to income from ordinary sources. A separate set of tax rates apply to other types of income. For instance, long-term capital gains are taxed at 0% to the extent you are in the lowest two tax brackets.

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 13.7% ($6,858.50 / $50,000).

2020 federal tax brackets

Looking ahead to your 2020 filing? You’ll want to reference the 2020 tax tables as the income ranges can shift slightly each year due to inflation adjustments.

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 $518,400 $622,050 $518,400

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.

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