These Are the Tax Brackets for 2021 (Plus 2 Tax Changes to Know About)

A woman looks at her tax statement.
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The year 2021 is looking a lot like 2020, at least in terms of taxes.

The IRS just released its inflation adjustments for 2021 federal income tax rates and brackets. While these changes are unlikely to have a huge impact on your bottom line, there are a few things you should be aware of heading into the new year.

Because these are the 2021 tax rates, they’ll determine your tax bill that will be due in 2022. You’ll use 2020 rates and brackets when you file your taxes on or before April 15, 2021.

How the 2020 Tax Brackets Break Down

There are seven tax brackets that range from 10% to 37%. The 2021 tax brackets break down as follows:

Unmarried Individuals

Tax Bracket Taxable Income
10% Up to $9,950
12% $9,950 to $40,525
22% $40,525 to $86,375
24% $86,375 to $164,925
32% $164,925 to $209,425
35% $209,425 to $523,600
37% Over $523,600

Married Individuals Filing Jointly or Surviving Spouses

Tax Bracket Taxable Income
10% Up to $19,900
12% $19,900 to $81,050
22% $81,050 to $172,750
24% $172,750 to $329,850
32% $329,850 to $418,850
35% $418,850 to $628,300
37% Over $628,300

Heads of Household

Tax Bracket Taxable Income
10% Up to $14,200
12% $14,200 to $54,200
22% $54,200 to $86,350
24% $86,350 to $164,900
32% $164,900 to $209,400
35% $209,400 to $523,600
37% Over $523,600
Pro Tip

Not sure of your filing status? This interactive IRS quiz can help you determine the correct status. If you qualify for more than one, it tells you which one will result in the lowest tax bill.

Tax rates apply to the income within each bracket. So if you’re an unmarried individual with taxable income of $50,000, you won’t pay 22% of that $50,000 to Uncle Sam.

According to the 2021 tax brackets, you’d pay:

  • 10% on the first $9,950
  • 12% on the next $30,575 ($40,525 – $9,950 = $30,575)
  • 22% on the next $9,475 ($50,000 – $40,525 = $9,475)

2 Tax Changes That Could Affect You in 2021

The modified tax brackets aren’t the only changes the IRS announced. About 60 tax provisions will be adjusted in the new year. A few highlights:

  • The standard deduction will rise slightly: The standard deduction will rise by $150 to $12,550 for people who are single filers or married filing separately. For those who are married filing jointly, the standard deduction will rise by $300 to $25,100.
  • Some limited-income families can get an extra $66. The maximum Earned Income Tax Credit will increase to $6,728, from $6,660 in 2020. You need at least three children to qualify for the maximum amount.

3 Tax Rules That Aren’t Changing in 2021

  • IRA contribution limits won’t change. The traditional and Roth IRA contribution limits will remain at $6,000 for people under 50. The extra $1,000 “catch-up” contribution the IRS allows people 50 and older to make won’t change either.
  • 401(k) contribution limits aren’t changing either: If you have an employer-sponsored tax-deferred retirement plan, like a 401(k) or 403(b), your maximum contribution is still $19,500 in 2021. The additional “catch-up” contribution workers ages 50 and older can make will also remain at $6,500.
  • There’s no limit on itemized deductions. The Tax Cuts and Jobs Act of 2017 suspended these limits.
FROM THE MAKE MONEY FORUM

Ready to Start Your 2021 Tax Prep?

OK, we get it: You’re probably not thinking about your 2021 taxes yet. After all, you haven’t even had your 2020 Thanksgiving turkey.

But if you’re the plan-ahead type, you can check out this comprehensive summary of 2021 tax changes courtesy of the IRS.

Even if you’re not ready to jump into 2020 tax planning mode just yet, keep in mind that a new year is often a good time to check your tax withholdings and make adjustments if necessary. So make a date with yourself in early January for a quick tax checkup.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]