What Are Income Tax Brackets and How Do They Work?

In America, the government decides how much tax you owe by dividing your taxable income into chunks – or “brackets” – and taxing each chunk at a different rate. Here’s a look at the current tax brackets and how our system of progressive income taxation works. 

What are tax brackets? 

A tax bracket describes a tax rate (percentage) and a range of income that gets taxed at that rate. There are currently seven federal income tax brackets. * 

*State tax laws vary. Each state has its own set of income tax brackets and rates. To learn about income taxes in your state, click here. 

What are the current income tax brackets? 

The income tax brackets for tax year 2020 (returns that are filed in 2021) are as follows: 

Single Filers  

Taxable income between:  Taxes due:  
$0-$9,875  10% of taxable income  
$9,875-$40,125  $987.50 + 12% of the amount over $9,875  
$40,126-$85,525  $4,617.50 + 22% of the amount over $40,125   
$85,526-$163,300  $14,605.50 + 24% of the amount over $85,525   
$163,301-$207,350  $33,271.50 + 32% of the amount over $163,300   
$207,351-$518,400  $47,367.50 + 35% of the amount over $207,350   
$518,401+  $156,235.50 + 37% of the amount over $518,400   

Married Filing Separately  

Taxable income between:  Taxes due:  
$0-$9,875    10% of taxable income   
$9,875-$40,125      $987.50 + 12% of the amount over $9,875      
$40,126-$85,525     $4,617.50 + 22% of the amount over $40,125      
$85,526-$163,300      $14,605.50 + 24% of the amount over $85,525      
$163,301-$207,350    $33,271.50 + 32% of the amount over $163,300      
$207,351-$311,025     $47,367.50 + 35% of the amount over $207,350     
$311,026+   $83,653.75 + 37% of the amount over $311,025   

Married Filing Jointly (and Qualifying Widow/ers with Dependent)  

Taxable income between:  Taxes due:  
$0 to $19,750  10% of taxable income  
$19,751 to $80,250  $1,975 plus 12% of the amount over $19,750  
$80,251 to $171,050  $9,235 plus 22% of the amount over $80,250  
$171,051 to $326,600  $29,211 plus 24% of the amount over $171,050  
$326,601 to $414,700  $66,543 plus 32% of the amount over $326,600  
$414,701 to $622,050  $94,735 plus 35% of the amount over $414,700  
$622,051+  $167,307.50 plus 37% of the amount over $622,050  

Head of Household  

Taxable income between:  Taxes due:  
$0 to $14,100  10% of taxable income  
$14,101 to $53,700  $1,410 plus 12% of the amount over $14,100  
$53,701 to $85,500  $6,162 plus 22% of the amount over $53,700  
$85,501 to $163,300  $13,158 plus 24% of the amount over $85,500  
$163,301 to $207,350  $31,830 plus 32% of the amount over $163,300  
$207,351 to $518,400  $45,926 plus 35% of the amount over $207,350  
$518,401+  $154,793.50 plus 37% of the amount over $518,400 

What is progressive income taxation? 

With progressive taxation, each tax rate only applies to the chunk of income that falls in that bracket. What this means is, depending on how much you earn, your entire income may not be taxed at the same rate. As you earn more money, you could move into a new, higher tax bracket — but only a portion of your income is taxed at the higher rate. Even taxpayers in the highest bracket have some income taxed at each of the lower rates.  

Here’s an example:  

A single filer with $25,000 in taxable income falls into the 12% percent bracket. However, they do not pay 12% percent of the first $9,875. Instead, they pay 10% of 9,875 plus 12% of the remaining $15125. This will give them their total federal income tax of roughly $2,802.50 

What is taxable income? 

Taxable income can include: 

  • Wages 
  • Your salary 
  • Bonuses 
  • Tips 
  • Investment income 
  • Unearned income 

This combination of all income you received during the year is used by the IRS to calculate how much you owe for taxes. It is also known as adjusted gross income, or the income you receive minus any tax deductions or exemptions. 

For more information about taxable income, read also Do I Make Enough to Pay Taxes? 

How often do income tax brackets change? 

The IRS bumps up the income range in the individual income tax brackets every year to account for inflation. But the rates for each bracket typically do not change unless there is a change in the tax code. The most recent change to the income tax rates occurred in 2018, after the Tax Cuts and Jobs Act was signed into law.