It’s that time of year again when our minds start turning towards what taxes we will owe come April. Federal income tax brackets are one of the critical pieces of the tax code.
These tax brackets were created to facilitate taxing different income levels. Below you will find the tax brackets for income earned in 2023 and 2022 (as well as past years).
Our progressive tax rate structure (i.e., as income increases, taxes increase) requires that we define the starting and stopping points for the application of different rates.
Table of Contents
Tax Brackets: A Quick History
The first federal income tax brackets came into effect in the United States back in 1913, when the income tax became a permanent fixture in our government.
Although very simple and low, the initial tax brackets were not unlike our current set of tax brackets. The initial rates ranged from 1 – 7% and were applied to incomes from $0 to $500,000 plus.
It wasn’t until the 1940s that we saw the first unique tax bracket created for single filers and those married filing separately.
Over the years, the federal income tax has grown to as many as 50 different brackets based on income. And rates on top earners grew to 94% on incomes above $200,000.
Thankfully, in the late 1980s, much was done to simplify the tax bracket structure. Since then, we’ve settled in on anywhere from 5 to 7 rates across various incomes.
It should be noted that the income is based on taxable income (this number is on line 43 of Form 1040), and the income ranges vary from year to year based on inflation.
Related: What If You Can’t Pay Your Taxes This Year?
What are the 2023 Income Tax Brackets?
The changes for the 2023 federal income tax brackets were increases in the cut-off to account for inflation.
The table below shows the tax brackets for each income level for single filers and those married and filing jointly.
2023 Federal Income Tax Brackets
| Tax Rate | Married Filing Jointly | Most Single Filers |
|---|---|---|
| 10% | $0 to $22,000 | $0 to $11,000 |
| 12% | $22,001 to $89,450 | $11,001 to $44,725 |
| 22% | $89,451 to $190,750 | $44,726 to $95,375 |
| 24% | $190,751 to $364,200 | $95,376 to $182,100 |
| 32% | $364,201 to $462,500 | $182,101 to $231,250 |
| 35% | $462,501 to $693,750 | $232,251 to $578,125 |
| 37% | $693,751+ | $578,126+ |
2022 Federal Income Tax Brackets
| Tax Rate | Married Filing Jointly | Most Single Filers |
|---|---|---|
| 10% | $0 to $20,550 | $0 to $10,275 |
| 12% | $20,551 to $83,550 | $10,276 to $41,775 |
| 22% | $83,551 to $178,150 | $41,776 to $89,075 |
| 24% | $178,151 to $340,100 | $89,076 to $170,050 |
| 32% | $340,101 to $431,900 | $170,051 to $215,950 |
| 35% | $431,901 to $647,850 | $215,951 to $539,900 |
| 37% | $647,851+ | $539,901+ |
2021 Federal Income Tax Brackets
| Tax Rate | Married Filing Jointly | Most Single Filers |
|---|---|---|
| 10% | $0 - $19,900 | $0 - $9,950 |
| 12% | $19,901 - $81,050 | $9,951 - $40,525 |
| 22% | $81,051 - $172,750 | $40,526 - $86,375 |
| 24% | $172,751 - $329,850 | $86,376 - $164,925 |
| 32% | $329,851 - $418,850 | $164,926 - $209,425 |
| 35% | $418,851 - $628,300 | $209,426 - $523,600 |
| 37% | $628,300+ | $523,600+ |
2020 Federal Income Tax Brackets
| Tax Rate | Married Filing Jointly | Most Single Filers |
|---|---|---|
| 10% | $0-$19,750 | $0-$9,875 |
| 12% | $19,751 - $80,250 | $9,876 - $40,125 |
| 22% | $80,251 - $171,050 | $40,126 - $85,525 |
| 24% | $171,051 - $326,600 | $85,526 - $163,300 |
| 32% | $326,601 - $414,700 | $163,301 - $207,350 |
| 35% | $414,701 - $622,050 | $207,351 - $518,400 |
| 37% | $622,051+ | $518,401+ |
2019 Federal Income Tax Brackets
| Tax Rate | Married Filing Jointly | Most Single Filers |
|---|---|---|
| 10% | $0-$19,400 | $0-$9,700 |
| 12% | $19,401 - $78,950 | $9,701 - $39,475 |
| 22% | $78,951 - $168,400 | $39,476 - $84,200 |
| 24% | $168,401 - $321,450 | $84,201 - $160,725 |
| 32% | $321,451 - $408,201 | $160,726 - $204,100 |
| 35% | $408,201 - $612,350 | $204,101 - $510,300 |
| 37% | $612,351+ | $510,301+ |
Use the Tax Brackets to Plan
If you are doing your tax planning, you should look at the tax brackets to help you calculate. With a little bit of foresight, you might be able to reduce your tax burden in the current year or defer it to the next, depending on what your desires are.
Related: 7 Strategies to Save You Thousands Each Year in Taxes (Year-End Tax Planning)
Here we have all the tax brackets back to 2010, so you can compare and see how your income taxes may change year over year. Reviewing them and noting how tax liability has changed over the years is also enjoyable.
>>> Click to Show 2010 thru 2018 show
How to Determine Your Tax Bracket
You may be wondering, “what is my tax bracket?” That’s a great question because it shows you are curious about how much of your earnings are going to the U.S. government to pay for the protection and services they provide.
Related: TurboTax Online Tax Software Review: Get Your Best Tax Return
As taxpayers, we sometimes fall asleep at the tax-paying wheel and don’t pay attention to our taxes because they are taken out of our paychecks without much fuss. Knowing your tax bracket will help you make educated decisions about money moves that will affect the taxes you pay at the end of the year.
What are Progressive Taxes and How Do They Work?
Your federal income tax bracket is the rate at which your highest income level is taxed. This rate is called your marginal tax rate.
Your marginal rate doesn’t mean you pay that exact percentage across all your income. It means that you are paying that amount at your highest income level.
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Therefore, if you are a single filer and are in the 24% tax bracket, you don’t pay 24% of your income in taxes. You pay 24% on everything over $89,076.
Another personal rate you might want to know is your effective tax rate. You calculate this by dividing your total tax by your taxable income.
Pull out last year’s return and see what you get. Someone in the 24% federal income tax bracket could have an effective tax rate as low as 13%.
What is Adjusted Gross Income?
It’s important to know your adjusted gross income (AGI) because many tax rules and privileges are based on it. To get your adjusted gross income, you start with your gross income then make any adjustments.
Related: What is the Minimum Income to File Taxes?
Take that number and subtract your exemptions and deductions to arrive at your taxable income. Here are a couple of equations to help you visualize the explanations above:
Gross Income – Adjustments = Adjusted Gross Income (AGI)
Adjusted Gross Income (AGI) – Exemptions – Deductions = Taxable Income
AGI is used on your tax return for a variety of purposes such as determining eligibility for certain deductions. The lower the AGI, the greater the deductions and credits for which you will be eligible.
Don’t confuse AGI with MAGI (modified adjusted gross income). To calculate the MAGI, you need to take your AGI and add back in certain items such as foreign earned income, foreign-housing deductions, student loan deductions, tax-exempt interest, the excluded portion of Social Security benefits, etc.
The Internal Revenue Service (IRS) uses an individual’s MAGI include to determine how much of that person’s IRA contribution is deductible and whether an individual is eligible for premium tax credits.
How to Get Into a Lower Tax Bracket
The two most common ways to reduce your tax burden include credits and deductions.
- Tax credits reduce the amount of taxes you owe dollar for dollar. They don’t have an effect on your tax bracket.
- Tax deductions, however, do have an impact on your tax bracket. They reduce how much of your income is taxed by lowering your taxable income. This, in turn, could kick you into a lower tax bracket, which means you pay a lower tax rate.
It’s important to reiterate that being in a tax bracket does not mean that’s the rate you pay on everything you earn. Don’t make the mistake of using your highest bracket for planning purposes. Doing so can lead you to overpay your taxes and extend an interest-free loan to the government.
Related: 9 Badass States Without State Income Taxes (and How They Get Away with It)
Nearly Half Don’t Pay an Income Tax
Many people fork over a fourth of their paycheck each week to the federal government for income taxes. It’s not fun to give up this money knowing that others aren’t paying the same percentage.
The government does provide some benefit, but if everyone isn’t contributing, then that can’t be perceived as fair, right?
According to data from the Tax Policy Center, more than 76 million or 44.4% of Americans didn’t pay any federal income tax in 2018. This number is up from 72.6 million people or 43.7% in 2017.
There are certainly people in this country that should be exempt from paying taxes, but almost half is ridiculous. Surely some of those people are earning a decent living. How are they able to escape paying income taxes?
Like many people, I feel like we need a simple solution to collecting revenue and that everyone should pay something. I would be in favor of some type of national sales tax or flat income tax. Anything to wipe the slate clean and just start over.
We have a mess of a tax code that makes it costly to file, enforce, and collect. I’m not sure we’ll ever see it happen though.
What are the Corporate Tax Brackets?
Good question. This on is easy. There is only one federal corporate tax bracket. It’s 21%. All corporations are taxed on every dollar at 21%. There used to be more complex corporate tax rates, resulting in brackets.
However, tax law changes under the Trump Administration streamlined the corporate tax rate structure and gave every corporation the same rate. Of course, this doesn’t apply to “pass-through” entities like the S Corp.
The Bottom Line
Learning the basics of the tax code and understanding how tax brackets work will help you when preparing your taxes. It can also help you make a plan for next year’s taxes on how you can lower your tax burden by contributing to tax-advantaged accounts.
Keep in mind that the tax information above only applies to federal taxes. Each state has its own set of laws and regulations that govern how residents are taxed. If you’re lucky to live in one of the states that don’t have a state income tax, you’ll only have to worry about the federal tax brackets listed above.
If you have any questions about your tax return or how your taxes are calculated, consult with a qualified tax professional. Make sure you have a basic understanding of what goes into your taxes so you can ensure you’re getting all of the credits and deductions to which you’re entitled.
Have you started planning for next year’s tax return? How have the tax bracket changes affected you? Share in the comments.
