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Just How Many Tax Brackets Are There?

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how many tax brackets are there

With income tax—the more you make, the bigger percentage of your income you’re expected to pay. Behind that common concept are income tax brackets—a less common concept. A tax bracket is a range of income amounts expected to pay the same tax rate or percentage. The IRS uses the term marginal income tax brackets. It has seven for each federal filing status, such Single, Married Filing Jointly, Head of Household, etc. There are seven tax brackets for 2019: 10%, 12%, 22%, 24%, 32%, 35% and 37%.

Here’s a primer on federal tax brackets to help you understand what exactly you’re paying Uncle Sam.

How Tax Brackets Work

The seven tax bracket percentages are how much of your adjusted gross income (AGI) you’re expected to pay in federal tax. If you fall into the 12% bracket, you pay 12% of your income as federal taxes.

Note, we said adjusted gross income and not just income. The IRS defines AGI “as gross income minus adjustments to income.” Put in plain English, that’s the money you actually earned minus pre-tax deductions, such as a contribution to your employer 401(k), and other adjustments. It doesn’t exclude your standard federal deduction or itemized deductions. Your AGI is your taxable income.

Additionally, your filing status combines with your AGI to affect how much you’re expected to pay as shown in Table 1.

Table 1: 2018 income levels for each filing status for the seven tax brackets

Tax Bracket Single Married Filing Jointly Head of Household Married Filing Separately
10% $0–$9,525 $0–$19,050 $0–$13,600 $0–$9,525
12% $9,526–$38,700 $19,051–$77,400 $13,601–$51,800 $9,526–$38,700
22% $38,701–$82,500 $77,401–$165,000 $51,801–$82,500 $38,701–$82,500
24% $82,501–$157,500 $165,001–$315,000 $82,501–$157,500 $82,501–$157,500
32% $157,501–$200,000 $315,001–$400,000 $157,501–$200,000 $157,501–$200,000
35% $200,001–$500,000 $400,001–$600,000 $200,001–$500,000 $200,001–$300,000
37% $500,001 or more $600,001 or more $500,001 or more $300,001 or more

Source: https://www.irs.com/articles/2018-federal-tax-rates-personal-exemptions-and-standard-deductions

But wait! It’s really not that simple. Instead of being subject to a blanket percentage, you only pay the higher tax rates on the portion of your income that falls into that particular tax bracket. And you pay the lower rates associated with the lower tax brackets for those sections of your taxable income.

Let’s say you’re single and had $30,000 of taxable income in 2018, after your deductions. For the first $9,525, you’re in the 10% tax bracket and pay $952.50, a 10% tax on this portion of your taxable income.

For the remainder of your taxable income, $20,475, you fall into the 12% tax bracket—$9,526 to $38,700—and you pay $2,457, a 12% tax on this portion of your taxable income. This holds true for the other tax brackets as well.

About Filing Statuses

In addition to the seven tax brackets, there are five filing statuses:

  1. Single
  2. Married Filing Separately
  3. Married Filing Jointly
  4. Head of Household
  5. Qualifying Widow(er) with Dependent Child

Your tax bracket—or AGI—and your filing status are inseparable when filing your taxes. Your filing status really drives what tax bracket your AGI puts you in, what standard deduction you receive and what tax deductions and credits you qualify for.

I’m Single

To fall into the Single filing status is simple. You have to have never been married, be divorced or legally separated from your spouse or been widowed before January 1, 2018, and not have remarried during 2018.

I’m Married

If you’re married, you have two filing status options—Married Filing Jointly and Married Filing Separately. To qualify for either, you have to have legally married by the end of the previous tax year, have your spouse die during the tax year and not remarry. Even if your spouse dies during the current year, as long as he/she was living at the end of the tax year, you can file with one of the Married statuses.

If you file Married Filing Separately, you should only report your own income and not any of your spouse’s income. You’ll also only be eligible for credit and deductions based on your income.

When you file as Married Filing Jointly, you file a joint income tax return with your spouse and report your combined income, deductions and exemptions. Both you and your spouse are held responsible for the payment of the taxes owed. If your spouse fails to pay his or her share of the taxes due, you may be required to pay his or her share. If you don’t want to be held responsible for any taxes due if a spouse fails to pay, you can file as Married Filing Separately.

I’m the Head of a Household

To file as Head of Household, you have to be divorced or legally separated at the end of the tax year, be married by living separately for at least 6 months of the tax year or be married to a nonresident alien and not wanting to treat your spouse as a resident alien. You also have to pay 50% or more of the costs of maintaining your home and have a qualifying dependent, which can be a child or relative, living with you for 6 or more months.

I’m a Widow with a Dependent Child

If you can file as a Qualifying Widow(er) with a Dependent Child, you fall into the state bracket as Married Filing Jointly. You also qualify for the highest standard deduction.

To qualify for this filing status for 2018:

  • Your spouse had to die before 2018 started
  • You have to have a child you can claim as a dependent
  • You have to have lived in your home for all of 2018
  • You have to have paid more than 50% of the cost of maintaining your home
  • You have to have been eligible to file a joint return with your spouse the year she/she passed away

Tax Brackets for 2019

The Tax Cuts and Jobs Act changes tax brackets for 2019 by adjusting them for inflation.  You’ll actually be able to earn slightly more money before getting bumped up to the next higher tax bracket in 2019.

Table 2: 2019 Income levels for each filing status for the seven tax brackets

Tax Bracket Single Married Filing Jointly Head of Household Married Filing Separately
10% $0–$9,700 $0–$19,400 $0–$13,850 $0–$9,700
12% $9,701–$39,475 $19,401–$78,950 $13,851–$52,850 $9,701–$39,475
22% $39,476–$84,200 $78,951–$168,400 $52,851–$84,200 $39,476–$84,200
24% $84,201–$160,725 $168,401–$321,450 $84,201–$160,700 $84,201–$160,725
32% $160,726–$204,100 $321,451–$408,200 $160,701–$204,100 $160,726–$204,100
35% $204,101–$510,300 $408,201–$612,350 $204,101–$510,300 $204,101–$306,175
37% Over $510,300 Over $612,350 Over $510,300 Over $306,175

Source: https://www.fool.com/taxes/2018/12/10/what-are-the-2019-tax-brackets.aspx

Learn More

If you have questions regarding tax bracket percentages and the income thresholds, it can be a good idea to utilize the knowledgeable services of a professional tax preparer to help guide you through tax deductions, itemized deductions, and other tax complexities. The tax advice you gain with a tax preparer can help you maximize your refund and understand your tax liability.

This article was last published January 10, 2017, and has been updated by another author.


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