U.S.A. Tax Brackets and Federal Income Tax Rates
There are seven federal income tax brackets. Here’s what they are, how they work and how they affect you.
There are seven federal tax brackets for the 2020 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your bracket depends on your taxable income and filing status. These are the rates for taxes due in May 2021.
Tax brackets and rates for the 2021 tax year, as well as for 2019 and previous years, are elsewhere on this page.
2020 federal income tax brackets
(for taxes due in May 2021, or in October 2021 with an extension)
Expand the filing status that applies to you.
Single filers
Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
10% | $0 to $9,875 | 10% of taxable income |
12% | $9,876 to $40,125 | $987.50 plus 12% of the amount over $9,875 |
22% | $40,126 to $85,525 | $4,617.50 plus 22% of the amount over $40,125 |
24% | $85,526 to $163,300 | $14,605.50 plus 24% of the amount over $85,525 |
32% | $163,301 to $207,350 | $33,271.50 plus 32% of the amount over $163,300 |
35% | $207,351 to $518,400 | $47,367.50 plus 35% of the amount over $207,350 |
37% | $518,401 or more | $156,235 plus 37% of the amount over $518,400 |
How tax brackets work
The United States has a progressive tax system, meaning people with higher taxable incomes pay higher federal income tax rates.
Being “in” a tax bracket doesn’t mean you pay that federal income tax rate on everything you make. The progressive tax system means that people with higher taxable incomes are subject to higher federal income tax rates, and people with lower taxable incomes are subject to lower federal income tax rates.
The government decides how much tax you owe by dividing your taxable income into chunks — also known as tax brackets — and each chunk gets taxed at the corresponding tax rate. The beauty of this is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income. (This is the idea behind the concept of effective tax rate.)
Example #1: Let’s say you’re a single filer with $32,000 in taxable income. That puts you in the 12% tax bracket in 2020. But do you pay 12% on all $32,000? No. Actually, you pay only 10% on the first $9,875; you pay 12% on the rest. (Look at the tax brackets above to see the breakout.)
Example #2: If you had $50,000 of taxable income, you’d pay 10% on that first $9,875 and 12% on the chunk of income between $9,876 and $40,125. And then you’d pay 22% on the rest, because some of your $50,000 of taxable income falls into the 22% tax bracket. The total bill would be about $6,800 — about 14% of your taxable income, even though you’re in the 22% bracket. That 14% is called your effective tax rate.
That’s the deal only for federal income taxes. Your state might have different brackets, a flat income tax or no income tax at all.
What is a marginal tax rate?
Your marginal tax rate is the tax rate you would pay on one more dollar of taxable income. This typically equates to your tax bracket.
For example, if you’re a single filer with $30,000 of taxable income, you would be in the 12% tax bracket. If your taxable income went up by $1, you would pay 12% on that extra dollar too.
If you had $41,000 of taxable income, however, much of it would still fall within the 12% bracket, but the last few hundred dollars would land in the 22% tax bracket. Your marginal tax rate would be 22%.
How to get into a lower tax bracket and pay a lower federal income tax rate
Two common ways of reducing your tax bill are credits and deductions.
Tax credits directly reduce the amount of tax you owe; they don’t affect what bracket you’re in.
Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Generally, deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction could save you $220.
In other words: Take all the tax deductions you can claim — they can reduce your taxable income and could kick you to a lower bracket, which means you pay a lower tax rate.
