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What is My Tax Bracket for 2020?

With the recent release of the new 2020 tax brackets, you can begin thinking about how to approach your 2020 finances in a tax-efficient way. Tax rates themselves have not changed; however, the tax bracket ranges were adjusted based on inflation. What does this mean for you? You could potentially land in a different bracket for 2020 even if your income has remained the same.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. 

You will land in a higher tax bracket as your income increases, and will receive a higher tax rate for each portion of your income. 

Why Would My Tax Bracket Be Different? 

Tax brackets are regularly adjusted by the IRS to account for inflation. With inflation consumers face higher prices, meaning the purchasing power of their dollar is decreased. Keeping this in mind, the IRS adjusts the brackets periodically 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 case, 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. 

  1. https://www.irs.gov/pub/irs-drop/rp-19-44.pdf
  2. https://www.aier.org/article/bracket-creep-a-real-problem-for-taxpayers/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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