LOADINGERROR LOADING
You might still be focused on surviving 2020, but when it comes to taxes, it doesn’t hurt to plan ahead.
This month, the IRS released updates to the tax code for tax year 2021. Though actual tax brackets remained the same (10%, 12%, 22%, 24%, 32% and 35%), income limits for each bracket were increased to account for inflation. The standard deduction for 2021 was also increased.
Advertisem*nt
These changes will affect how much you pay when you file income taxes in 2022. Here’s a look at the 2021 tax brackets and other changes to personal taxes next year.
Tax Brackets For Tax Year 2021
Single filers:
- 10%: Up to $9,950
- 12%: Income of $9,951 to $40,525
- 22%: Income of $40,526 to $86,375
- 24%: Income of $86,376 to $164,925
- 32%: Income of $164,926 to $209,425
- 35%: Income of $209,426 to $523,600
- 37%: Income over $523,600
Married, filing jointly:
- 10%: Up to $19,900
- 12%: Income of $19,901 to $81,050
- 22%: Income of $81,051 to $172,750
- 24%: Income of $172,751 to $329,850
- 32%: Income of $329,851 to $418,850
- 35%: Income of $418,851 to $628,300
- 37%: Income over $628,300
Married, filing separately:
- 10%: Up to $9,950
- 12%: Income of $9,951 to $40,525
- 22%: Income of $40,526 to $86,375
- 24%: Income of $86,376 to $164,925
- 32%: Income of $164,926 to $209,425
- 35%: Income of $209,426 to $314,150
- 37%: Income over $314,150
Heads of household:
- 10%: Up to $14,200
- 12%: Income of $14,201 to $54,200
- 22%: Income of $54,201 to $86,350
- 24%: Income of $86,351 to $164,900
- 32%: Income of $164,901 to $209,400
- 35%: Income of $209,401 to $523,600
- 37%: Income over $523,600
Wondering about tax brackets for 2020? Take a look at them here.
What Do The 2021 Tax Brackets Mean?
Tax brackets are a way to ensure that the lowest-earning Americans aren’t forced to pay the same tax rate as higher earners.
The U.S. follows a progressive tax system, meaning that portions of your income are taxed at different rates. So if you’re a single filer earning $80,000 per year, for example, you don’t actually pay 22% on that income.
Instead, the first $9,950 of income is taxed at 10%. The next $9,951 to $40,525 of income is taxed at 12%. The last $39,425 of your income (income above $40,525) is what would be taxed at the highest rate of 22%.
Add up all those tax amounts ($995 + $3,669 + $8,673.50), and you end up with a total tax liability of $13,337.50, or about 16.7%.
Advertisem*nt
To better understand how tax brackets impact your taxes for the year, there are a couple of numbers that are helpful to know. The first is marginal tax rate. This is the highest tax rate that you paid on your taxable income. In our example above, the highest tax rate on $80,000 in single-payer income is 22%.
Next is your effective tax rate, which is the average tax you paid on all of your income. Going back to our example, if you paid a total of $13,337.50 on $80,000 of income, your effective tax rate is about 16.7%. So as you can see, just because you fall into the 22% tax bracket (your marginal tax rate) above, it doesn’t mean you actually pay a full 22% of your income in taxes.
Also note that these tax brackets only apply your taxable income, which is what’s left over after subtracting your standard or itemized deductions, plus any other adjustments.
Standard Deduction Increased For 2021
In addition to updating income limits on tax brackets, the IRS also increased the standard deduction ― a flat dollar amount that decreases taxable income for everyone who doesn’t itemize.
For individuals and married couples filing separately, the standard deduction for tax year 2021 increased by $150 to $12,550. For married couples filing jointly, the deduction increased by $300 to $25,100. Finally, for heads of households, the deduction grew by $150, up to $18,800 for 2021.
Advertisem*nt
Support HuffPost
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
At HuffPost, we believe that everyone needs high-quality journalism, but we understand that not everyone can afford to pay for expensive news subscriptions. That is why we are committed to providing deeply reported, carefully fact-checked news that is freely accessible to everyone.
Whether you come to HuffPost for updates on the 2024 presidential race, hard-hitting investigations into critical issues facing our country today, or trending stories that make you laugh, we appreciate you. The truth is, news costs money to produce, and we are proud that we have never put our stories behind an expensive paywall.
Would you join us to help keep our stories free for all? Your contribution of as little as $2 will go a long way.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circ*mstances have changed since you last contributed, we hope you’ll consider contributing to HuffPost once more.
Support HuffPost
Already contributed? Log in to hide these messages.