Understanding your federal income tax rate is crucial for accurate tax planning and budgeting. The Internal Revenue Service (IRS) adjusts tax rates annually to account for inflation, ensuring that taxpayers are not pushed into higher tax brackets due to rising prices. This guide will provide a detailed overview of the 2021 federal income tax rates, including brackets, filing statuses, and key considerations.
2021 Federal Income Tax Brackets
The 2021 federal income tax brackets vary depending on your filing status. The following table outlines the brackets and corresponding tax rates for each filing status:
| Filing Status | Taxable Income Range | Tax Rate |
|---|---|---|
| Single | $0 – $9,950 | 10% |
| Single | $9,951 – $40,400 | 12% |
| Single | $40,401 – $86,375 | 22% |
| Single | $86,376 – $164,925 | 24% |
| Single | $164,926 – $209,425 | 32% |
| Single | $209,426 – $523,600 | 35% |
| Single | Over $523,600 | 37% |
| Married Filing Jointly | $0 – $19,900 | 10% |
| Married Filing Jointly | $19,901 – $80,800 | 12% |
| Married Filing Jointly | $80,801 – $172,750 | 22% |
| Married Filing Jointly | $172,751 – $329,850 | 24% |
| Married Filing Jointly | $329,851 – $418,850 | 32% |
| Married Filing Jointly | $418,851 – $628,300 | 35% |
| Married Filing Jointly | Over $628,300 | 37% |
| Head of Household | $0 – $14,200 | 10% |
| Head of Household | $14,201 – $54,100 | 12% |
| Head of Household | $54,101 – $86,350 | 22% |
| Head of Household | $86,351 – $164,900 | 24% |
| Head of Household | $164,901 – $209,400 | 32% |
| Head of Household | $209,401 – $523,600 | 35% |
| Head of Household | Over $523,600 | 37% |
Filing Statuses
Your filing status determines which tax bracket you fall into. The following are the most common filing statuses:
- Single: This status applies to unmarried individuals who are not claimed as dependents on someone else’s tax return.
- Married Filing Jointly: This status applies to married couples who file a joint tax return.
- Married Filing Separately: This status applies to married couples who file separate tax returns.
- Head of Household: This status applies to unmarried individuals who pay more than half the costs of keeping up a home for themselves and their qualifying dependents.
Standard Deduction and Personal Exemption
In addition to tax brackets, the standard deduction and personal exemption also impact your taxable income. The standard deduction is a specific amount that you can deduct from your income before calculating your taxes. The personal exemption is a specific amount that you can deduct for yourself and each of your dependents.
For 2021, the standard deduction amounts are as follows:
- Single: $12,550
- Married Filing Jointly: $25,100
- Head of Household: $18,800
The personal exemption was eliminated for 2021 and subsequent tax years.
Alternative Minimum Tax (AMT)
The AMT is a parallel tax system designed to ensure that high-income taxpayers pay a minimum amount of tax. The AMT uses a different set of rules and exemptions than the regular income tax system. If your AMT liability is greater than your regular income tax liability, you may be required to pay the AMT.
Earned Income Tax Credit (EITC)
The EITC is a tax credit for low- and moderate-income working individuals and families. The amount of the credit varies depending on your income, filing status, and number of qualifying children.
Child Tax Credit (CTC)
The CTC is a tax credit for parents and guardians of qualifying children. The amount of the credit varies depending on your income, filing status, and the age of your children.
Capital Gains Tax Rates
Capital gains are profits from the sale of assets, such as stocks, bonds, or real estate. Capital gains are taxed at different rates than ordinary income. The following are the capital gains tax rates for 2021:
- 0% for assets held for more than one year and taxable income below $40,400 for single filers and $80,800 for married couples filing jointly.
- 15% for assets held for more than one year and taxable income between $40,400 and $445,850 for single filers and $80,800 and $501,600 for married couples filing jointly.
- 20% for assets held for more than one year and taxable income above $445,850 for single filers and $501,600 for married couples filing jointly.
Qualified Business Income Deduction
The Qualified Business Income Deduction (QBI) allows eligible taxpayers to deduct up to 20% of their qualified business income from their taxable income. This deduction is available to owners of pass-through businesses, such as sole proprietorships, partnerships, and S corporations.
Annual Exclusion for Gifts
The annual exclusion for gifts allows you to give up to a certain amount of money to another person each year without incurring gift tax. For 2021, the annual exclusion is $15,000 per recipient.
Understanding the 2021 federal income tax rates is essential for accurate tax planning and budgeting. By utilizing the information provided in this guide, you can determine your tax bracket, filing status, and eligibility for various tax deductions and credits. Remember to consult with a tax professional for personalized advice and assistance with your specific tax situation.
Tax Brackets Explained For Beginners in The USA
FAQ
What was the federal income tax rate in 2021?
What is the federal tax withholding rate for 2021?
How do I know my federal tax rate?
What are the tax rates for 2021?
The tax rates for 2021 are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. It’s important to remember that moving up into a higher tax bracket does not mean that all of your income will be taxed at the higher rate. Only the money you earn within a particular bracket is subject to the corresponding tax rate. The tables below help demonstrate this concept.
What are the tax brackets for 2021?
The federal tax brackets are broken down into seven (7) taxable income groups, based on your filing status. The tax rates for 2021 are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. It’s important to remember that moving up into a higher tax bracket does not mean that all of your income will be taxed at the higher rate.
What is the top marginal income tax rate in 2021?
The top marginal income tax rate of 37 percent will hit taxpayers with taxable income of $523,600 and higher for single filers and $628,300 and higher for married couples filing jointly. 2021 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households
When are 2021 tax returns due?
In general, 2021 personal income tax returns are due by April 15, 2022. If you are looking for 2020 tax rates, you can find them HERE. The federal tax brackets are broken down into seven (7) taxable income groups, based on your filing status. The tax rates for 2021 are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.