Tax Updates: How to be prepared for the Tax Bracket System

How to be prepared for the Tax Bracket System

In 2017 the Tax Cut & Jobs Act (TCJA) was signed into law, which locked in the tax rates through 2025. Due to inflation the tax brackets were expanded but the tax rates remained the same. In 2017 the TCJA reduced tax rates for many taxpayers, the highest rate is 37% which applies if your income exceeds $628,300.

2021 Federal Income Tax Rates

Single

Tax Rate

Taxable Income Bracket

Tax Owed

10%

$0 – $9,950

10% of taxable income

12%

$9,951 – $40,525

$995 + 12% of the amount over $9,950

22%

$40,526 – $86,375

$4,664 + 22% of the amount over $40,525

24%

$86,376 – $164,925

$14,751 + 24% of the amount over $86,375

32%

$164,926 – $209,425

$33,603 + 32% of the amount over $164,925

35%

$209,426 – $523,600

$47,843 + 35% of the amount over $209,425

37%

$523,601 or more

$157,804.25 + 37% of the amount over $523,600

Head of Household

Tax Rate

Taxable Income Bracket

Tax Owed

10%

$0 – $14,200

10% of taxable income

12%

$14,201 – $54,200

$1,420 + 12% of the amount over $14,200

22%

$54,201 – $86,350

$6,220 + 22% of the amount over $54,200

24%

$86,351 – $164,900

$13,293 + 24% of the amount over $86,350

32%

$164,901 – $209,400

$32,145 + 32% of the amount over $164,900

35%

$209,401 – $ 523,600

$46,385 + 35% of the amount over $209,400

37%

$523,601 or more

$156,355 + 37% of the amount over $523,600

Married Filing Jointly

Tax Rate

Taxable Income Bracket

Tax Owed

10%

$0 – $19,900

10% of taxable income

12%

$19,901 – $81,050

$1,990 + 12% of the amount over $19,900

22%

$81,051 – $172,750

$9,328 + 22% of the amount over $81,050

24%

$172,751 – $329,850

$29,502 + 24% of the amount over $172,750

32%

$329,851 – $418,850

$67,206 + 32% of the amount over $329,850

35%

$418,851 – $628,300

$95,686 + 35% of the amount over $418,850

37%

$628,301 or more

$168,993.50 + 37% of the amount over $628,300

Married Filing Separately

Tax Rate

Taxable Income Bracket

Tax Owed

10%

$0 – $9,950

10% of taxable income

12%

$9,951 – $40,525

$995 + 12% of the amount over $9,950

22%

$40,526 – $86,375

$4,664 + 22% of the amount over $40,525

24%

$86,376 – $164,925

$14,751 + 24% of the amount over $86,375

32%

$164,926 – $209,425

$33,603 + 32% of the amount over $164,925

35%

$209,426 – $314,150

$47,843 + 35% of the amount over $209,425

37%

$314,151 or more

$84,496 +
37% of the amount over $314,150

Tax Bracket System

The higher your income the higher your income tax rate. For example, you need Tax services and you’re a single filer with $45,000 in taxable income. That puts you in the 22% tax bracket, you pay a flat $4,664 plus 22% on 4,475, your total tax liability is $5,648.50. 

Do you have the right Tax Preparer on your team?

Now keep in mind, you don’t pay taxes on your gross income, is taxable income is calculated after your deductions and credits are applied. This is where securing the right tax services is beneficial. If you need an experienced tax professional to provide you tax preparation services book your tax consult now. We also, provide virtual tax services, to gain access to our app give us a call.

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