Federal income tax brackets are adjusted every year for inflation. They're slightly higher for Tax Year 2021 than Tax Year 2020. Read on for both tables.
The federal income tax rates remain unchanged for the 2021 and 2022 tax years: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The income brackets, though, are adjusted slightly for inflation. Read on for more about the federal income tax brackets for Tax Year 2021 (due April 15, 2022) and Tax Year 2022 (due April 15, 2023). You can work with a financial advisor who specializes in taxes to craft a financial plan that takes advantage of your tax bracket.
The U.S. currently has seven federal income tax brackets, with rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. If you’re one of the lucky few to earn enough to fall into the 37% bracket, that doesn’t mean that the entirety of your taxable income will be subject to a 37% tax. Instead, 37% is your top marginal tax rate. You should note, however, that President Joe Biden has proposed raising the top bracket up to 39.6%.
With a marginal tax rate, you pay that rate only on the amount of your income that falls into a certain range. To understand how marginal rates work, consider the bottom tax rate of 10%. For single filers, all income between $0 and $9,950 is subject to a 10% tax rate. If you have $10,150 in taxable income, the first $9,950 is subject to the 10% rate and the remaining $200 is subject to the tax rate of the next bracket (12%). Check out the charts below to see what your top marginal tax rate is for tax years 2020 and 2021.
2021 Federal Income Tax Brackets (Deadline: April 18, 2022 or October 17, 2022) Single Married Filing Jointly Married Filing Separately Head of Household 10% $0 – $9,950 $0 – 19,900 $0 – $9,950 $0 – $14,200 12% $9,951 – $40,525 $19,901 – $81,050 $9,951 – $40,525 $14,201 – $54,200 22% $40,526 – $86,375 $81,051 – $172,750 $40,526 – $86,375 $54,201 – $86,350 24% $86,376 – $164,925 $172,751 – $329,850 $86,376 – $164,925 $86,351 – $164,900 32% $164,926 – $209,425 $329,851 – $418,850 $164,926 – $209,425 $164,901 – $209,400 35% $209,426 – $523,600 $418,851 – $628,300 $209,426 – $314,150 $209,401 – $523,600 37% $523,601+ $628,301+ $314,151+ $523,601+ Federal Income Tax Bracket for 2022 (filing deadline: April 17, 2023) Single Married Filing Jointly Married Filing Separately Head of Household 10% $0 – $10,275 $0 – $20,550 $0 – $10,275 $0 – $14,650 12% $10,276 – $41,775 $20,551 – $83,550 $10,276 – $41,775 $14,651 – $55,900 22% $41,776 – $89,075 $83,551 – $178,150 $41,776 – $89,075 $55,901 – $89,050 24% $89,076 – $170,050 $178,151 – $340,100 $89,076 – $170,050 $89,051 – $170,050 32% $170,051 – $215,950 $340,101 – $431,900 $170,051 – $215,950 $170,051 – $215,950 35% $215,951 – $539,900 $431,901 – $647,850 $215,951 – $539,900 $215,951 – $539,900 37% $539,901+ $647,851+ $539,901+ $539,901+
In rare cases, such as when one spouse is subject to tax refund garnishing because of unpaid debts to the state or federal government, opting for the “Married filing separately” tax status can be advantageous. Typically, though, filing jointly provides a tax break.
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Before President-elect Donald Trump proposed it at the federal level, Alabama passed a law exempting overtime wages from taxes back in November 2023. Act 2023-421 (H.B. 217) excluded any amounts received by a full-time, hourly wage employee as compensation for work performed above 40 hours a week from state income taxes, starting January 1, 2024.
