By Kaye A. Thomas
Current as of November 23, 2018
Knowing your tax bracket and understanding its significance can help with your tax planning.
Note: This page provides an explanation of tax brackets. If you’re just looking for the numbers, they’re available here:
- 2019 Tax Rate Schedules (returns filed in 2020)
- 2018 Tax Rate Schedules (returns filed in 2019)
- 2017 Tax Rate Schedules (returns filed in 2018)
Your tax bracket can be used to estimate the amount of additional tax you’ll pay if your income increases — or the amount you’ll save if you can claim a deduction. If you’re in the 22% tax bracket you can expect to pay about $220 additional tax if you have $1,000 additional taxable income. In the 12% tax bracket, a $200 deduction will save you about $24. Knowing your tax bracket can help you make better tax planning decisions.
Where tax brackets come from
Congress establishes tax rates that apply to different levels of taxable income. Current law provides rates from 10% to 37%. These rates are due to the Tax Cuts and Jobs Act, passed at the end of 2017, which adjusted most rates downward.
The range of income where you stay at any particular rate is known as a tax bracket. The Tax Cuts and Jobs Act changed brackets sizes also. For a single person in 2019 the rate on taxable income between $39,475 and $84,200 is 22%, so those numbers establish the 22% bracket. If you’re single and your taxable income is between those two numbers, your tax bracket for that year is 22%.
Here are some of the most frequently asked questions about tax brackets.
- Is my tax bracket established by the amount I earn on the job?
Some people have in mind the general notion that their tax bracket depends on how much they earn as an employee, and won’t be affected by other kinds of income. In reality your tax bracket depends on your taxable income, regardless of the source of that income. For example, you can move into a higher tax bracket because of increased interest income or a distribution from a pension plan — or even because of a decrease in your deductions.
- Will capital gain or qualified dividend income push my other income into a higher tax bracket?
No, the tax rates apply first to your “ordinary income” (income from sources other than long-term capital gains or qualified dividends) so these items that are taxed at special rates won’t push your other income into a higher tax bracket.
- If my ordinary income puts me in the 15% tax bracket, can I receive an unlimited amount of long-term capital gain at the 0% rate?
No, the 0% rate applies only to the amount of long-term capital gain and qualified dividend income needed to bring your taxable income (including these items) up to a threshold level that limits the 0% rate. (This threshold level used to correspond to the end of the 15% bracket for ordinary income, but it’s now a different number, though still very close.) For example, if your ordinary income is $4,000 below this threshold level for your filing status and you have a $10,000 long-term capital gain, you’ll pay 0% on $4,000 of your capital gain but the rest will be taxable.
- Will my overall tax go up sharply when my income reaches the point where I’m in the next tax bracket?
No, there’s no reason to be concerned about this possibility. When you reach a higher tax bracket, any additional income will be taxed at the higher rate, but the income required to reach that level is still taxed at the lower rates. For example, if your taxable income is just $100 above the limit on the 12% bracket, the last $100 dollars will fall in the 22% bracket and will cause your tax to increase by $22, but lower tax rates will still apply to all your other income.
- Can I determine my tax bracket by looking at the withholding rate on my paystub?
No, withholding rates are based on averages, not specific tax brackets. For example, your withholding rate may be about 17%, even though there’s no tax bracket between 12% and 22%.
- Are tax brackets the same as marginal rates?
Not exactly. In some cases the added tax you pay when your income goes up isn’t the same as your tax bracket. That’s because the added income can cause you to lose some other tax benefit. You may find that $1,000 of added income causes your tax to go up by $252 even though you’re in the 24% bracket. Your tax bracket is just an approximation of the added tax. To be more precise, we would say you have an effective marginal rate of 25.2%. In most cases, the tax bracket is close enough to the effective marginal rate for purposes of tax planning.
Finding your tax bracket
Finding your tax bracket involves two steps. First, determine your taxable income for the relevant year. Then look that number up in the relevant tax rate schedule.
Tip: If you use tax software to prepare your returns, check to see if it will generate a report that includes information about your tax bracket.
Taxable income. You can find your taxable income for a previous year by looking at your tax return. It’s clearly labeled — but not very conspicuous. Just look for the words “taxable income.”
If you need to estimate your taxable income for a year in the future, usually the best way to start is to know your taxable income for the most recent year. Then make adjustments for changes you might anticipate: increases or decreases in income or deductions, and perhaps a change in filing status.
Tax rate schedules. Once you know your taxable income and filing status, you need to look it up in the appropriate tax rate schedule. This is not the same as the tax tables published by the IRS for taxable income increments of $25 or $50! Those tables give you dollar amounts but not tax rates. What you want is a schedule that tells you the tax rate as a percentage for your level of taxable income.
Tax rate schedules aren’t always easy to locate in IRS instructions or publications. Current and prior year tax rate schedules for every filing status can be found in our Reference Room.
Here’s a sample tax rate schedule: the 2019 tax rate schedule for single filers.
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If you’re a single filer and your 2019 taxable income is $20,000, then you’re in the 12% tax bracket. With $50,000 of taxable income you would be in the 22% tax bracket.