US Tax Brackets for 2020, 2021, and Beyond

Taxable income is governed by federal income tax brackets. The rate of tax you pay depends on your income bracket. But there is more to it than that. Single filers will pay more than heads of households, and there is also a different rate for married couples. What’s more, taxes don’t stop at the federal level and you may also be required to pay a state tax rate.

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No one ever said that taxes were easy, but in this guide, we’ll try to clear up some of the confusion, looking at the amount of tax you will pay, as well as personal exemption rates, tax deductions, and more.

What You Need to Know

Before you file, you need to know your filing status:

  • Single: You are not married and do not have dependents.
  • Married filing jointly: You are married and wish to combine your filing with your spouse.
  • Married filing separately: You are married but wish to file separately to keep your finances separate from your spouse.
  • Head of household: You are unmarried and live with a qualifying person, such as a child or unmarried relative.

Next, you need to calculate your taxable income. You arrive at this figure by calculating all qualifying income, including employment and side hustles. After this, you need to subtract tax adjustments (such as student loan interest) to get your adjusted gross income. Finally, account for all tax deductions, which we have discussed in more detail further down.

Federal Tax Rates for 2020

Tax rates change every year, but the following rates have been set by the Internal Revenue Service (IRS) for 2020 to 2021.

  1. 10% – $0 to $9,875 (Single); $0 to $19,750 (Joint); $0 to $14,100 (Head)
  2. 12% – $9,876 to $40,125 (Single); $19,751 to $80,250 (Joint); $14,101 to $53,700 (Head)
  3. 22% – $40,126 to $85,525 (Single); $80,251 to $171,050 (Joint); $53,701 to $85,500 (Head)
  4. 24% – $85,526 to $163,300 (Single); $171,051 to $326,600 (Joint); $85,501 to $163,300 (Head)
  5. 32% – $163,301 to $207,350 (Single); $326,601 to $414,700 (Joint); $163,301 to $207,350 (Head)
  6. 35% – $207,351 to $518,400 (Single); $414,701 to $622,050 (Joint); $207,351 to $518,400 (Head)
  7. 37% – $518,401+ (Single); $622,051+ (Joint); $518,401+ (Head)

Marginal Tax Rate and Effective Tax Rate

One of the most misunderstood aspects of tax law concerns the marginal tax rate and how this compares to the effective tax rate. 

As an example, let’s say that you earn $100,000 for the year and are a single filer. According to the federal tax brackets outlined above, this puts you in the 24% range, which means you owe $24,000, right?

Not quite. This isn’t how tax brackets work. 

It’s a progressive tax system, which means your income will match each progressive bracket until you reach that 24%. 

In other words, the first $9,875 you earn will be taxed at 10%, the next $30,249 will be taxed at 12%, and so on. Only the final $14,474 will actually be taxed at the 24% bracket. Your marginal rate is 24%, as this is the highest rate you’ll pay on your income, but your effective rate is the sum of all those lower tax brackets, which is much less overall.

Tax Deductions and Capital Gains

Your taxable income is the money you have left after accounting for deductions. Itemized deductions can be added to your filing to reduce your total tax, and they can include business expenses, medical expenses, mortgage interest, and more.

The Trump organization has made many changes, however, and you can no longer make as many deductions as you once could.

Capital gains may also come into in. This is the money that you earn through investments. If you buy gold bullion for $10,000 and sell to for $12,000, you’ve made a $2,000 profit and may be charged a specific tax rate depending on where you live. 

Capital gains tax also accounts for deductions, and in the above example, you may only report a $1,000 profit after accounting for storage fees, shipping, and depreciation.

State Tax Income Brackets

In addition to federal tax, you may also have to pay state tax. These rates are generally much less, and several states don’t tax you at all. However, there are some expensive states out there, as this list shows.

  • Alabama: 2% – 5% with 3 income brackets ($500 – $3,001).
  • Alaska: None
  • Arizona: 2.59% – 4.54% with 5 income brackets ($10,601 – $158,996).
  • Arkansas: 0.9% – 6.9% with 6 income brackets ($4,299 – $35,100).
  • California: 1% – 12.3% with 9 income brackets ($8,544 – $572,980).
  • Colorado: Flat rate of 4.63%.
  • Connecticut: 3% – 6.99% with 7 income brackets ($10,000 – $500,000).
  • Delaware: 0% – 6.6% with 7 income brackets ($2,000 – $60,001).
  • District of Columbia: 4% – 8.95% with 5 income brackets ($10,000 – $1,000,000).
  • Florida: None.
  • Georgia: 1% – 5.75% with 6 income brackets ($750 – $7,001).
  • Hawaii: 1.4% – 11% with 12 income brackets ($2,400 – $200,000).
  • Idaho: 1.125% – 6.925% with 7 income brackets ($1,504 – $11,279).
  • Illinois: Flat rate of 4.95%.
  • Indiana: Flat rate of 3.23%.
  • Iowa: 0.33% – 8.53% with 9 income brackets ($1,598 – $71,910).
  • Kansas: 3.1% – 5.7% with 3 income brackets ($15,000-$30,000).
  • Kentucky: Flat rate of 5%.
  • Louisiana: 2% – 6% with 3 income brackets ($12,500 – $50,001).
  • Maine: 5.8% – 7.15% with 3 income brackets ($21,450 – $50,750).
  • Maryland: 2% – 5.75% with 8 income brackets ($1,000 – $250,000).
  • Massachusetts: Flat rate of 5.05%.
  • Michigan: Flat rate of 4.25%.
  • Minnesota: 5.35% – 9.85% with 4 income brackets ($26,520 – $163,890).
  • Mississippi: 3% – 5% with 3 income brackets ($5,000 – $10,001).
  • Missouri: 1.5% – 5.4% with 9 income brackets ($1,053 – $8,424).
  • Montana: 1% – 6.9% with 7 income brackets ($3,000 – $17,900).
  • Nebraska: 2.46% – 6.84% with 4 income brackets ($3,230 – $31,160).
  • Nevada: None.
  • New Hampshire: Flat rate of 5% on investment income only.
  • New Jersey: 1.4% – 10.75% with 6 income brackets ($20,000 – $5,000,000)
  • New Mexico: 1.7% – 4.9% with 4 income brackets ($5,500 – $16,001).
  • New York: 4% – 8.82% with 8 income brackets ($8,500 – $1,077,550).
  • North Carolina: Flat rate of 5.25%.
  • North Dakota: 1.1% – 2.9% with 5 income brackets ($39,450 – $433,200).
  • Ohio: 0% – 4.997% with 8 income brackets ($10,850 – $217,400).
  • Oklahoma: 0.5% – 5% with 6 income brackets ($1,000 – $7,200).
  • Oregon: 5% – 9.9% with 4 income brackets ($3,350 – $125,000).
  • Pennsylvania: Flat rate of 3.07%.
  • Rhode Island: 3.75% – 5.99% with 3 income brackets ($64,050 – $145,600).
  • South Carolina: 0% – 7% with 6 income brackets ($3,030 – $15,160).
  • South Dakota: None.
  • Tennessee: Flat rate of 2%, but only on investment income.
  • Texas: None.
  • Utah: Flat rate of 4.95%.
  • Vermont: 3.35% – 8.75% with 5 income brackets ($38,700 – $195,450).
  • Virginia: 2% – 5.75% with 4 income brackets ($3,000 – $17,001).
  • Washington: None.
  • West Virginia: 3% – 6.5% with 5 income brackets ($10,000 – $60,000).
  • Wisconsin: 4% – 7.65% with 4 income brackets ($11,760 – $258,950).
  • Wyoming: None.

Bottom Line: Get Help

The United States tax system is one of the most complicated in the developed world and places a lot of pressure on individuals. Once you spend some time going over your tax return and familiarizing yourself with the process, you’ll likely discover that it’s not as scary as you once thought and will be able to file quickly and easily in future tax years.

But if you don’t have the time or can’t wrap your head around it, hire an accountant or use tax software like TurboTax. Neither option is free, but if you’re making a lot of money and paying a higher tax rate, they could save you much more than they will cost you.