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Homenewsy2021 tax brackets are here - here's what you'll owe next year

2021 tax brackets are here – here’s what you’ll owe next year

The year 2021 looks a lot like 2020, at least in terms of taxes.

The IRS released its inflation adjustments for the 2021 federal income tax rates and brackets. While these changes are unlikely to have a large impact on your results, there are a few things to keep in mind.

Because these are the 2021 tax rates, they will determine your tax bill due in 2022. You will use the 2020 rates and parentheses when you file your taxes no later than May 17, 2021. That is 32 days later than usual . to the extension of the tax period.

How the 2021 tax brackets are broken down

There are seven tax brackets ranging from 10% to 37%. The 2020 and 2021 tax brackets are broken down as follows:

Single individuals

Tax support Taxable income for 2020 (use it when you file your return in 2021) Taxable income for 2021 (use it when you file your return in 2022)
10% Up to $ 9,875 Up to $ 9,950
12% $ 9,875 to $ 40,125n $ 9,950 to $ 40,525
22% $ 40,125 to $ 85,525 $ 40,525 to $ 86,375
24% $ 85,525 to $ 163,300 $ 86,375 to $ 164,925
32% $ 163,300 to $ 207,350 $ 164,925 to $ 209,425
35% $ 207,350 to $ 518,400 $ 209,425 to $ 523,600
37% More than $ 518,400 More than $ 523,600

Married individuals filing joint return or surviving spouses

Tax support Taxable income for 2020 (use it when you file your return in 2021) Taxable income for 2021 (use it when you file your return in 2022)
10% Up to $ 19,750 Up to $ 19,900
12% $ 19,750 to $ 80,250n $ 19,900 to $ 81,050
22% $ 80,250 to $ 171,050 $ 81,050 to $ 172,750
24% $ 171,050 to $ 326,600 $ 172,750 to $ 329,850
32% $ 326,600 to $ 414,700n $ 329,850 to $ 418,850
35% $ 414,700 to $ 622,050n $ 418,850 to $ 628,300
37% More than $ 622,050 More than $ 628,300

Heads of household

Tax support Taxable income for 2020 (use it when you file your return in 2021) Taxable income for 2021 (use it when you file your return in 2022)
10% Up to $ 14,100 Up to $ 14,200
12% $ 14,100 to $ 53,700n $ 14,200 to $ 54,200
22% $ 53,700 to $ 85,500 $ 54,200 to $ 86,350
24% $ 85,500 to $ 163,300 $ 86,350 to $ 164,900
32% $ 163,300 to $ 207,350 $ 164,900 to $ 209,400
35% $ 207,350 to $ 518,400 $ 209,400 to $ 523,600
37% More than $ 518,400 More than $ 523,600
Professional advice

Not sure of your marital status for filing purposes? This interactive IRS questionnaire 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 are applied to income within each bracket. So if you are a single person with taxable income of $ 50,000, you will not pay 22% of that $ 50,000 to Uncle Sam.

Based on the 2021 tax brackets (the ones you’ll use for next year’s return), you would 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 are not the only changes for 2021. About 60 tax provisions were adjusted in the new year. Some highlights:

  • The standard deduction will increase slightly: For 2020, the standard deduction is $ 12,400 for single taxpayers and married people filing separately. In 2021, it will increase by $ 150 to $ 12,550 for single filers. For those married filing jointly, the standard deduction will increase by $ 300, from $ 24,800 in 2020 to $ 25,100 in 2021.
  • Some limited-income families may receive an additional $ 68. The maximum Earned Income Tax Credit will increase in 2021 to $ 6,728, from $ 6,660 in 2020. You need at least three children to qualify for the maximum amount.

3 tax rules that won’t change in 2021

  • The IRA contribution limits will not change. Traditional IRA and Roth IRA contribution limits will remain at $ 6,000 for people under age 50. The additional $ 1,000 “catch-up” contribution that the IRS allows people age 50 and older to make won’t change either. You can still fund your IRA for 2020 until tax day, which is May 17, 2021.
  • The 401 (k) contribution limits are not changing either: If you have an employer-sponsored tax-deferred retirement plan, such as a 401 (k) or 403 (b), your maximum contribution is still $ 19,500 in 2021. The additional “catch-up” contribution that employees can make Workers aged 50 and over will also remain at $ 6,500.
  • There is no limit to itemized deductions. The Tax Cuts and Jobs Act of 2017 suspended these limits.

Ready to start your 2021 tax preparation?

If you’re ready to dive into your taxes, you can check out this full summary of the 2021 tax changes courtesy of the IRS.

Even if you’re not ready to move into 2021 tax planning mode yet, keep in mind that this is a good time to check your tax withholdings and make adjustments if necessary. Just be sure to file or request an extension before the May 17 deadline. If you are unable to pay your tax bill for 2020, it is essential that you file a tax return anyway and request a payment plan from the IRS.

Robin Hartill is a Certified Financial Planner and Senior Editor for The Penny Hoarder. Write Dear Penny’s personal finance advice column. Send your misleading money questions to [email protected]



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