Which tax bracket are you in?
Knowing the 2019 federal income tax brackets and which one you fit into is key to being prepared for the 2020 tax season.
Get to know what the tax brackets are for 2019 and 2020, how U.S. tax brackets work and how to determine what you owe before you file your return.
What are the federal income tax brackets for 2019?
There are seven distinct U.S. income tax brackets for 2019, each with a different tax rate. The tax rates applied to your 2019 taxes are based on your taxable income and which of the four filing statuses (Single; Married, filing jointly; Married, filing separately; and Head of household) you choose to file. Each status and rate are tied to a unique range of taxable income.
Here’s a breakdown of the seven federal tax brackets for 2019 (for returns filed by the April 2020 deadline):
What are income tax brackets for 2020?
There are seven federal tax brackets in place for the 2020 income tax season. Income thresholds have increased slightly from 2019 due to inflation.
A breakdown of tax brackets and taxable income ranges for 2020 (for taxes due in 2021):
How do tax brackets work?
Federal tax brackets are what the IRS uses to calculate how much you owe when you file your return. Brackets are not based on gross income, but rather your taxable income and filing status. Because the U.S. uses a graduated tax system, those with higher taxable incomes generally pay higher income tax rates.
To better understand how federal tax brackets work, it may help to think of your taxable income as segments, each of which faces a progressively higher tax rate than the last.
Say you’re filing as ‘Single’ and claiming $50,000 in taxable income for 2019. According to the 2019 tax brackets, the first segment of your income ($9,700) is subject to one tax rate (10%), while the next ($29,774) is subject to a higher rate (12%). And all taxable income beyond that ($10,526) is taxed even higher (22%).
So, to calculate your federal taxes in this instance, you would need to add up the amounts for all three segments:
$6,858.60, which would be your total taxable income for 2019.
Note that these income tax brackets and rates apply only to income from ordinary sources. Other types of income, such as long-term capital gains, tend to face different rates, particularly if you’re in a lower tax bracket.
What tax bracket am I in?
To figure out which federal tax bracket you’re in, you must know two things:
Reducing your taxable income is critical for lowering your tax bracket and, by extension, your tax liability. Taking advantage of available deductions and tax credits is not only legal, but highly recommended to reduce your tax burden and maximize your refund at tax time.
How did recent tax reform affect federal tax brackets?
While the Tax Cuts and Jobs Act (TJIA) of 2017 didn’t affect the number of tax brackets under the U.S. Tax Code, it did cut income tax rates for people in the lower five brackets. TJIA also increased the standard deduction, doubled the Child Tax Credit and eliminated the tax penalty for failure to have health insurance.
For more info on TJIA’s federal tax impact, click here.
What about state and local tax brackets?
State and local governments that levy income taxes usually have their own unique tax brackets, though state and local tax rates are usually lower than those imposed by the federal government. Seven states – Texas, Wyoming, Alaska, Florida, Nevada, Washington and South Dakota – currently have no income tax, while New Hampshire and Tennessee tax only income derived from interest and dividends.
Have questions about tax brackets?
Need some help figuring out your 2019 tax bracket? Or finding ways to lower your taxable income before the April 2020 deadline? Visit your local Liberty Tax® pro today.