What are the 2020 federal tax brackets?

This article was fact-checked by our editors and Christina Taylor, MBA, senior manager of tax operations for Credit Karma. It has been updated for the 2020 tax year.

Tax brackets play a big role in determining how much federal income tax you must pay each year.

A tax bracket is a range of income that is taxed at a certain tax rate. There are seven brackets and seven federal income tax rates (10%, 12%, 22%, 24%, 32%, 35% and 37%), and it’s likely more than one will apply to your income.

The federal government makes annual inflation adjustments to tax brackets, so the 2020 federal tax brackets are slightly different than the tax brackets that applied to your 2019 taxes.

Here’s a look at 2020 federal tax brackets, how they work and how they can affect your tax calculations.

• What are the 2020 federal income tax brackets?
• How do tax brackets work?
• How tax brackets help with tax calculations
• How to lower your tax bracket and income tax rate
• Tax brackets for previous tax years

What are the 2020 federal income tax brackets?

Here are the 2020 federal income tax brackets by filing status.

How do tax brackets work?

Six of the seven tax brackets have a lower and upper threshold that define the income range covered by the bracket. For example, for single filers the 10% tax bracket begins at $0 and ends at $9,875 for the 2020 tax year. The seventh and highest bracket — 37% —  doesn’t have an upper threshold.

Status matters

Bracket thresholds vary depending on your filing status — single, married filing jointly/qualifying widow(er), married filing separately or head of household.

Filing status can make a big difference when it comes to your taxable income. For example, a single filer with taxable income of $80,000 would have a marginal tax rate (more on that shortly) of 22%. But a married couple filing jointly with the same taxable income would be in a lower tax bracket of just 12%.

That’s because bracket income ranges for married taxpayers who file a joint return are much farther apart than the brackets for the single, head-of-household or married-filing-separately statuses.

Only taxable income counts

Federal tax law allows certain types of income to be excluded from taxation.

For example, the Tax Cuts and Jobs Act of 2017 altered the tax code so that alimony may not be taxable, depending on when you divorced or separated. And if your employer pays you directly for child care, you may be able to exclude that amount from your taxable income. There are other instances, as well, and you can learn more in IRS Publication 525, Taxable and Nontaxable Income.

You can have multiple brackets and rates

The U.S. has a progressive tax system, meaning the higher your income, the more tax you’re likely to owe. It also means that if you earn enough, multiple brackets (and rates) may apply to your income.

For example, if you’re filing as a single person with $9,000 of taxable income in 2020, you’d only be subject to the 10% tax rate, since all your income falls within the lowest tax bracket.

But four tax rates apply if you’re a single filer with taxable income of $100,000, because portions of your income fall within the 10%, 12%, 22% and 24% income thresholds. Sound confusing? We know. Don’t worry, we’ll walk you through an example below.

How tax brackets help with tax calculations

Knowing which tax brackets and corresponding tax rates apply to your income can help you estimate your likely federal income tax bill for the year.

To calculate your tax, you multiply the tax rate for each bracket by the amount of your income that falls within that bracket. Then sum up each tax bracket and rate that’s more than 10% to get the total amount owed.

Here’s an example.

What’s your marginal tax rate?

The highest tax rate that applies to your income is called your marginal tax rate. So in the example above, the single taxpayer’s marginal tax rate is 22%, because that’s the rate that corresponds to the highest bracket that applies to their taxable income.

Identifying your marginal tax rate can help you understand the potential tax impact of earning more money or taking certain tax deductions. Keep in mind that a marginal tax rate of 22% doesn’t mean you’re actually paying 22% tax on all your income.

Effective tax rate can be a more accurate way to think of your tax liability.

What’s your effective tax rate?

Effective tax rate is your total income tax obligation divided by your taxable income. For example, if your 2020 federal income tax bill is $14,338.50 and your taxable income is $84,000, your effective tax rate is 17%.

If you’re a single filer, taxable income of $84,000 would mean the 10%, 12% and 22% tax rates apply to portions of your income, and your marginal tax rate is 22%. But your effective tax rate — the percentage of your income that you’re actually paying in taxes — is lower than the highest rate that applies to your income.

How to lower your tax bracket and income tax rate

To lower your tax bracket, the tax rates that apply to your income, and — possibly — the amount of your tax obligation, you’ll need to reduce your total taxable income.

One way to do that is by using tax deductions, which can help reduce your tax liability.

There are three types of deductions.

• Standard deductions: The standard deduction is a set amount that you can deduct from your taxable income. Standard deduction amounts for 2020 are $24,800 for married couples filing jointly, $18,650 for heads of household, and $12,400 for single filers and married individuals filing separate returns.
• Itemized deductions: If you have expenses that add up to more than the standard deduction amount for your filing status, you may choose to itemize deductions instead. How much a deduction might save you depends on your marginal tax rate. Typically, you must itemize on your 1040 form to take deductions such as a medical expense deduction, property tax deduction or home mortgage interest.
• Above-the-line deductions: These are deductions you can claim in addition to the standard deduction and without itemizing deductions on your 1040 tax return. They typically include educator expenses (if you’re a teacher), contributions to health savings accounts, some retirement plan contributions and interest you paid on qualifying student loans.

If you’re looking to reduce your tax bill, you can also look at tax credits you may be eligible for. A tax credit is a dollar-for-dollar reduction in the amount of tax you owe, and if refundable, can even get you a bigger refund. But take note that credits won’t affect your tax bracket — instead they affect your total tax bill after tax brackets come into play.

Tax brackets for previous tax years

Next steps

Knowing which tax brackets and corresponding rates apply to your taxable income can help you get an idea of how much federal tax you might owe in a year. And knowing how much you might owe could allow you to make adjustments accordingly throughout the year — to either avoid a big tax bill when you file if you’re paying too little or to keep more money in your pocket if you’re overpaying.

Relevant sources: IRS Rev. Proc. 2019-44 | IRS Publication 525: Taxable and Nontaxable income (2019) | IRS: Credits and Deductions | IRS Rev. Proc. 2018-57 | IRS Rev. Proc. 2017-58