Will Your Tax Bracket Change in 2021?
Did you know that half of all Americans intentionally report an inaccurate income to lessen the amount they have to pay on their taxes?
Will your tax bracket standing in 2021 cause you strategize how much you report?
How can you pay less in taxes?
Hear’s everything you need to know about tax brackets in 2021.
Tax Bracket Changes
New tax rates went into effect in 2018. This may have altered your tax bracket when you filed your 2018 taxes in 2019. Due to the shift in inflation, your tax bracket could have changed in 2020 and may again change in 2021.
If you know the annual income you’re going to report for 2021, you can check out the 2021 tax bracket chart to see where you fall. To see if or how much your tax filing status has changed, look at the bracket you qualified under on your 2020 income tax return.
Below is a breakdown of the changing tax brackets from 2019, 2020, and 2021 for single filers and married couples filing jointly. The percent is the tax rate.
The second number or number range is the amount of taxable income for that tax bracket for single filers. The last number or number range is the amount of taxable income for that bracket for married couples filing jointly.
Tax rates for single filers and married couples filing jointly in 2021
- 10%, Up to $9,950, Up to $19,900
- 12%, $9,951 to $40,525, $19,901 to $81,050
- 22%, $40,526 to $86,375, $81,051 to $172,750
- 24%, $86,376 to $164,925, $172,751 to $329,850
- 32%, $164,926 to $209,425, $329,851 to $418,850
- 35%, $209,426 to $523,600, $418,851 to $628,300
- 37%, Over $523,600, Over $628,300
Tax rates for single filers and married couples filing jointly in 2020
- 10%, Up to $9,875, Up to $19,750
- 12%, $9,876 to $40,125, $19,751 to $80,250
- 22%, $40,126 to $85,525, $80,251 to $171,050
- 24%, $85,526 to $163,300, $171,051 to $326,600
- 32%, $163,301 to $207,350, $326,601 to $414,700
- 35%, $207,351 to $518,400, $414,701 to $622,050
- 37%, Over $518,400, Over $622,050
Tax rates for single filers and married couples filing jointly in 2019
- 10%, Up to $9,700, Up to $19,400
- 12%, $9,701 to $39,475, $19,401 to $78,950
- 22%, $39,476 to $84,200, $78,951 to $168,400
- 24%, $84,201 to $160,725, $168,401 to $321,450
- 32%, $160,726 to $204,100, $321,451 to $408,200
- 35%, $204,101 to $510,300, $408,201 to $612,350
- 37%, Over $510,300, Over $612,350
Tax Brackets 101
Your tax rate only applies to the total income earned in your bracket. For example, if your taxable income is $180,000 in 2020, only the sum earned beyond $163,301 is going to be taxed.
Tax rates are marginal, and in this example making $180,000 qualifies you in the 32% tax rate bracket which ranges from $163,301 to $207,351. The less you make the less you will owe.
This is where tax strategies become more of an art form than a discipline. For example, if your taxable income for 2020 is $164,00, you will only owe a tax rate of 32% on $699. But, if you report your taxable income as $206,000 you will owe 32% on $42,699.
The tax rate by tax bracket has also changed quite significantly. As we stated above the tax rate for households that make $163,301 to $207,351 is 32%. But, the tax rate for households that make $85,526 to $163,300 is only 24%.
Once again, the art of how much you choose to claim as taxable income can make a massive impact on what you owe. Literally, one dollar could make a difference if you have to pay 24% or 32% on your 2020 taxes.
Get a Tax Strategy
Even if you are a numbers person, calculating your own tax return can be a timely process. It’s easy to see how you can strategize the amount of income you report to land in a favorable tax bracket standing.
But how do you get there? How can you calculate your income in a favorable way? Do you have the know-how and time to dedicate to figuring all of this out on your own?
For more tips on how to file your taxes and maximize your income, click over to our finance section!
Did you know that half of all Americans intentionally report an inaccurate income to lessen the amount they have to pay on their taxes? Will your tax bracket standing in 2021 cause you strategize how much you report? How can you pay less in taxes? Hear’s everything you need to know about tax brackets in 2021. …
