What is My Tax Bracket for 2020?

The IRS recently released the new tax brackets for the 2020 tax year, so now you can start thinking about how to handle your 2020 finances in a tax-efficient way. The seven 2020 tax rates themselves didn't change (they are the same as those in affect for the 2019 calendar year), however the tax bracket ranges were modified based on inflation. So, you could be in a different tax bracket for 2020 than the last time you reported your taxes, even if your income has not changed.¹

Tax Brackets Are Marginal

The IRS divides income into different tax rates. Each subsequent portion of your income will have an increased tax rate. For example, if you make $40,125 in 2020, your first $9,875 will be taxed at 10 percent. The next portion of your income will be taxed at an increased rate; from $9,875 to $40,125, your tax rate will be 12 percent.

As your income increases, you’ll fall into higher tax brackets and will have a higher tax rate for each portion of your income.

Why Would My Tax Bracket Be Different?

The IRS regularly adjusts tax brackets to take inflation into consideration. This is because, with inflation, people will face higher prices, meaning the purchasing power of their dollar is decreased. Knowing this, the IRS adjusts brackets in order to avoid bracket creep, a circumstance that occurs when inflation pushes your income into a higher tax bracket, or credits and deductions are reduced. In this scenario, an individual may not actually have increased purchasing power or greater disposable income, even with an increase in wages and salaries.²

2020 Tax Brackets

Without further ado, here are the 2020 tax brackets according to your filing status and income from the IRS¹.

10% Tax Rate

Single Individuals: from $0 to $9,875
Married Individuals Filing Jointly: from $0 to $19,750
Heads of Households: from $0 to $14,100
Married Individuals Filing Separately: from $0 to $9,875

12% Tax Rate

Single Individuals: from $9,876 to $40,125
Married Individuals Filing Jointly: from $19,751 to $80,250
Heads of Households: from $14,101 to $53,700
Married Individuals Filing Separately: from $9,876 to $40,125

22% Tax Rate

Single Individuals: from $40,126 to $85,525
Married Individuals Filing Jointly: from $80,251 to $171,050
Heads of Households: from $53,701 to $85,500
Married Individuals Filing Separately: from $40,126 to $85,525

24% Tax Rate

Single Individuals: from $85,526 to $163,300
Married Individuals Filing Jointly: from $171,051 to $326,600
Heads of Households: from $85,501 to $163,300
Married Individuals Filing Separately: from $85,526 to $163,300

32% Tax Rate

Single Individuals: from $163,301 to $207,350
Married Individuals Filing Jointly: from $326,601 to $414,700
Heads of Households $163,301 to to $207,350
Married Individuals Filing Separately: from $163,301 to $207,350

35% Tax Rate

Single Individuals: $207,351 to $518,400
Married Individuals Filing Jointly: from $414,701 to $622,050
Heads of Households: from $207,351 to $518,400
Married Individuals Filing Separately: from $207,351 to $311,025

37% Tax Rate

Single Individuals: over $518,400
Married Individuals Filing Jointly: over $622,050
Heads of Households: over $518,400
Married Individuals Filing Separately: over $311,025¹

In addition to the tax inflation adjustments, the IRS also altered standard deductions. While the above rates and brackets are at the federal level, different states might have varying brackets and rates.